Question
Farris Company reported the following information for its two products: Product X Product Y Selling price per unit $ 110 $ 120 Variable cost per
Farris Company reported the following information for its two products:
Product X | Product Y | ||||||||
Selling price per unit | $ | 110 | $ | 120 | |||||
Variable cost per unit | 66 | 54 | |||||||
Due to labor constraints, demand for each of the products is greater than its supply. Product X requires one hour of labor to produce and product Y requires three hours of labor to produce. Which of the following statements is true?
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Product X should be produced and sold because it has a lower cost than Product Y.
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Product X should be produced and sold because it provides a higher contribution margin per labor hour than Product Y.
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Product Y should be produced and sold because it provided a higher contribution margin per unit than Product X.
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Product Y should be produced and sold because it provides more revenue than Product X.
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