Question
Managerial accounting ABC company produces produces 3 products X, Y and Z. Unit data of 3 product are as follows: X Y Z Selling price
Managerial accounting
ABC company produces produces 3 products X, Y and Z. Unit data of 3 product are as follows:
X | Y | Z | |
Selling price | $90 | $60 | $70 |
Direct material | $27 | $18 | $21 |
Labor cost | $29 | $35 | $30 |
Estimated Demand | 300 units | 275 units | 295 units |
All three products use the same direct materials, Metal. Metal costs $3 per pound and a maximum of 6,000 pounds is available each month. ABC must produce a minimum of 200 units of each product.
1) How many units of product X, Y and Z should ABC produce?
2) What is the maximum amount ABC would be willing to pay for another 500 pounds of metal? How many extra units they will be able to manufacture?
3) Assume that 600 pounds of metal got spoiled due to an accident. Calculate the optimal product mix again in this situation.
4) If the availability of materials worsen further, should ABC think of dropping the least profitable product? Why or why not? Explain briefly. Besides mention the qualitative factors that ABC can think about apart from quantitative factors while taking such decisions. Give your reasons.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started