Question

In: Accounting

A company produces 100 items of Product X and 1500 items of Product Y. Someone suggested...

A company produces 100 items of Product X and 1500 items of Product Y. Someone suggested to the management to try and focus on producing only one product instead of two. The Management is not sure which product would be more viable for them to produce as they currently adopt a Traditional Costing system, hence both products have the same cost price. You were asked to suggest an alternative way of computing costs, thus being able to direct the Management Team as to which product it would be more viable to produce and thus maximize profits. Discuss further. You may include a practical example to substantiate your argument.

Solutions

Expert Solution

Thus, company should focus on the product which gives Profit not Loss.


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