Question
Raven Co. owns a machine that can produce two specialized products. Production time for Product X is two units per hour and for Product Z
Raven Co. owns a machine that can produce two specialized products. Production time for Product X is two units per hour and for Product Z is five units per hour. The machines capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the companys output up to a maximum of 3,910 units of Product X and 2,055 units of Product Z. Selling prices and variable costs per unit to produce the products follow.
$ per unit | Product X | Product Z | ||||||
Selling price per unit | $ | 12.00 | $ | 7.20 | ||||
Variable costs per unit | 3.60 | 4.32 | ||||||
Determine the company's most profitable sales mix and the contribution margin that results from that sales mix.
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