Question

# XYZ makes three products A, B, & C that use compound W, the current constrained resource:...

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: 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