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Manico Company produces three products-X, Y, & Z-with the following characteristics: XYZSelling price per unit$21.00$17.00$16.00Variable cost per unit12.6012.756.40Contribution margin per unit$ 8.40$4.25$9.60 === ======= ====== ====Machine hours per unit536The company has only 2,000 machine hours available each month. If demand exceeds the company's capacity, in what sequence should orders be filled if the company wants to maximize its total contribution margin? Question 19Answera.Orders for Y first, X second, and Z thirdb.Orders for X first, Z second, and Y thirdc.Orders for Z first, X second, and Y thirdd.Orders for Z first and no orders for X or Y

Question

Manico Company produces three products-X, Y, & Z-with the following characteristics: XYZSelling price per unit21.0021.0017.0016.00Variablecostperunit12.6012.756.40Contributionmarginperunit16.00Variable cost per unit12.6012.756.40Contribution margin per unit 8.404.254.259.60 === ======= ====== ====Machine hours per unit536The company has only 2,000 machine hours available each month. If demand exceeds the company's capacity, in what sequence should orders be filled if the company wants to maximize its total contribution margin? Question 19Answera.Orders for Y first, X second, and Z thirdb.Orders for X first, Z second, and Y thirdc.Orders for Z first, X second, and Y thirdd.Orders for Z first and no orders for X or Y

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Solution

To determine the sequence of orders to maximize the total contribution margin, we need to calculate the contribution margin per machine hour for each product. This is done by dividing the contribution margin per unit by the machine hours per unit.

For product X: 8.40/5=8.40 / 5 = 1.68 per machine hour

For product Y: 4.25/3=4.25 / 3 = 1.42 per machine hour

For product Z: 9.60/6=9.60 / 6 = 1.60 per machine hour

The product with the highest contribution margin per machine hour should be produced first. Therefore, the sequence should be X first, Z second, and Y third. So, the answer is b. Orders for X first, Z second, and Y third.

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Similar Questions

Table 3.6 Taco LocoTaco Loco is considering a new addition to their menu. They have test marketed a number of possibilities and narrowed them down to three new products, X, Y, and Z. Each of these products is made from a different combination of beef, beans, and cheese, and each product has a price point. Taco Loco feels they can sell an X for $17, a Y for $13, and a Z for $14. The company's management science consultant formulates the following linear programming model for company management.Max R = 14Z + 13Y + 17Xsubject to:Beef 2Z + 3Y + 4X ≤ 28Cheese 9Z + 8Y + 11X ≤ 80Beans 4Z + 4Y + 2X ≤ 68X,Y,Z ≥ 0The sensitivity report from the computer model reads as follows:What is the increase in revenue if Taco Loco purchases 36 pounds of additional cheese for $1.19 and uses it optimally? (Round to 2 decimal places)

Manico Company produces three products-X, Y, & Z-with the following characteristics: XYZSelling price per unit$21.00$17.00$16.00Variable cost per unit12.6012.756.40Contribution margin per unit$ 8.40$4.25$9.60 === ======= ====== ====Machine hours per unit536The company has only 2,000 machine hours available each month. If demand exceeds the company's capacity, in what sequence should orders be filled if the company wants to maximize its total contribution margin? Question 19Answera.Orders for Y first, X second, and Z thirdb.Orders for X first, Z second, and Y thirdc.Orders for Z first, X second, and Y thirdd.Orders for Z first and no orders for X or Y

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