Question
3. The Tractor Division produces two product lines for replacement parts. Because the division can sell all of the product it can produce, Wayne has
3. The Tractor Division produces two product lines for replacement parts. Because the division can sell all of the product it can produce, Wayne has asked the manager to expand the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data:
Per Unit | ||
Part y | Part z | |
Sales price | 82.00 | 48.00 |
Variable costs | 25.00 | 19.00 |
Contribution margin | 57.00 | 29.00 |
CM Ratio | 69.50% | 60.40% |
After expansion, the factory will have a production capacity of 4,600 machine hours per month. The plant can manufacture either 26 units of Part Y or 50 units of Part Z per machine hour. Prepare an analysis to show which product line to emphasize.
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