Question

XYZ Company produces three products, A, B, and C. XYZ's plant capacity
is limited to 48,000 machine hours per year. The following information
is available for planning purposes:

                                    Product A       Product B       Product C
demand for next year .............  24,000 units   25,000 units   12,000 units
selling price per unit ...........    $80             $120            $160
direct material cost per unit ....    $24             $ 21            $ 38
direct labor cost per unit .......    $18             $ 50            $ 38
variable overhead cost per unit ..    $22             $ 25            $ 54 

It takes 0.80 machine hours to produce one unit of Product A; 1.25 machine
hours to produce one unit of Product B; and 1.60 machine hours to produce
one unit of Product C.

Assume that XYZ Company can work its plant overtime for 8,000 additional
machine hours. Overtime premiums will add 50% to direct labor costs.

Calculate the total number of units of Product C that XYZ Company should
produce in order to maximize its net income.

Answer 1

	CALCULATION OF CONTRIBUTION PER MACHIENE HOURS PER UNIT
		Product A	Product B	Product C
	Selling Price Per unit (A)	80	120	160
	Less: Variable Costs
	Direct Material Cost Per unit	24	21	38
	Direct Labour Cost per unit	18	50	38
	Variable Overhead Cost per unit	22	25	54
	Total Variable Cost (B)	64	96	130
	contribution (A-B = C)	16	24	30
	Machiene Hours required per units (D)	0.8	1.25	1.6
	Contribution per unit per hours =(C/D)	20	19.2	18.75
	Ranking on the basis on machine hours contribution	1st	2nd	3rd
	Production shedule be on the basis of Merit of contribution of machiene hours
		Units	Hours RequiredPEr units	Total Hours Required for production	total Hours Available For Production	Balance Hours
	Product A =	24000	0.8	19200	56000	36800
	Product B =	25000	1.25	31250	36800	5550
	Product C =	3469	1.6	5550	5550	0
	Answer = total number of units for product C = 3469 Units
	Note: Avalable hours = 48,000 Machiene Hours + 8000 addittional machiene hours
	Avalable hours = 56,000 Machiene Hours