Product mix decision. The Marquez Company has one machine on which it can produce either of two products, Y or Z. Sales demand for both products is such that the machine could operate at full capacity on either of the products, and Marquez can sell all output at current prices. Product Y requires 1 hour of machine time per unit of output and Product Z requires 2 hours of machine time per unit of output. Marquez charges depreciation of machines to products at the rate of $8 per hour.

The following information summarizes the per-unit cash inflows and costs of Products Y and Z.

Selling costs are the same whether Marquez produces Product Y or Z, or both; you may ignore them. Should Marquez Company plan to produce Product Y. Product Z, or some mixture of both? Why ?

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Selling Price Materials Labor Machine Depreciation" Allocated Portion of Fixed Factory Costs Total Cost per Unit Product Y Per Unit Product Z $30 $55 $4 $6 1 3 8 16 6 10 $19 $35 $11 $20 Gross Margin per Unit "This item under these circumstances could be referred to as "variable factory costs."