ABC Company produces three products: X, Y, and Z.Product X has a contribution margin of $40 and requires 2 hour of machine time.Product Y has a contribution margin of $60 and requires 4 hours of machine time.Product Z has a contribution margin of $72 and requires 3 hours of machine time.If machine hours are considered scarce, in what product mix order should ABC Company schedule the production of Products X, Y, and Z for the available machine hours?
A)first X, then Y, then Z.
B)first Z, then X, then Y.
C)first Z, then Y, then X.
D)first Y, then Z, then X.

Question

Quizplus · Accepted Answer

The product mix should be based on the highest contribution margin per machine hour. Product Z has a contribution margin of $24 per hour ($72/3), Product X has $20 per hour ($40/2), and Product Y has $15 per hour ($60/4). Therefore, the order should be Z, X, Y.

ABC Company Produces Three Products: X, Y, and Z