Question

XYZ makes three products A, B, & C that use compound W, the current constrained resource: A B C Selling price per unit $ 20 $ 30 $ 40 Variable cost per unit $ 12 $ 20 $ 20 Pounds of compound W per unit 2 4 4 A total of 2,000 pounds of compound W are available. The demand for each product is infinitely large. To generate the largest contribution margin, how many units of each product should XYZ manufacture? Garrison 16e Rechecks 2017-11-11 Multiple Choice 500 units of B only 500 units of C only 250 units of B and 250 units of C 1,000 units of A only

Answer 1

Answer: Product C 500 units only

Working:

Particulars	A	B	C
Selling price per unit	20	30	40
Less: Variable cost per unit	12	20	20
Contribution margin per unit	8	10	20
compound W required per unit	2	4	4
Contribution margin per constrained resources	4	2.5	5
ranking	2	3	1

To generate the largest contribution margin:

Use entire 2,000 components of W to make Product C

Because of higher contribution per pound of W

So number of units of Product C can manufacture = 2,000/4=500units