Question

1. Beta Ltd makes two products, X and Y. Unfortunately, although the market demand for both products is very high, the firm is unable to fully satisfy this demand for both products due to constraints in the availability of both machine capacity and skilled labor hours.

Product X requires 20 hours of machine time and 30 hours of skilled labor time. Product Y requires 10 hours of machine time and 20 hours of skilled labor time. The selling price is $200 for X and $260 for Y; while the variable cost per unit is $140 for X and $190 for Y. Machine capacity is only 1,150 hours per week and skilled labor time available is only 1,800 hours per week.

Required: Advice Beta Ltd on the profit-maximizing product mix. Round your answer to the lowest unit.

Answer 1

Product mix: Product X nil units and Product Y 90 units
	Product X		Product Y
Sales	$200		$260
Less: Variable cost	$140		$190
Contribution margin	$60		$70
Machine hours per unit	20 hours		10 hours
Contribution margin per machine hours	$3.00		$7.00
Rank	2		1
Skilled labor per unit	30 hours		20 hours
Contribution margin per skilled labor hours	$2.00		$3.50
Rank	2		1
Based on Machine hours & Skilled hours product Y be only produced to maximize the profit
as the market demand for both products is very high, so there is no limit to producing Y with available hours
and based on available Machine hours 1,150 & Skilled hours 1,800 product Y can only be produced 90 units
	Product Y
Units	90
Sales ($260 x 90)	$23,400
Less: Variable cost ($190 x 90)	$17,100
Contribution margin	$6,300