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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A company manufactures x units of Product A
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min on Machine I and 5 min on Machine II. To manufacture a unit of
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#
Variable
X
Variable
Y
1
205
1500
2
70
750
3
199
1500
4
151
1250
5
181
1250
6
217
1250
7
94
1000
8
298
2000
9
135
1000
10
211
1500
11
116
1250
12
72
500
13
82
500
14
206
1500
15
245
2000
16
219
1500
17
63
750
18
200
1500
19
151
1250
20
44
500
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