The Jackson Company produces 2 different products, each of which has unlimited demand.If there are 4,000 total available labor hours, and the company desires to maximize its contribution margin, how many units of each product should be produced? $\begin{array}{lr}&\text { Product }\
&X & Z \
\text { Selling price per unit }&\$ 8 & \$ 16 \
\text {Variable cost per unit. }&\$ 4 & \$ 9 \
\text {Labor hours per unit. }&2 & 4
\end{array}$
A)2,000 units of Product X and 0 units of Product Z
B)0 units of Product X and 1,000 units of Product Z
C)0 units of Product X and 4,000 units of Product Z
D)2,000 units of Product X and 4,000 units of Product Z

Question

The Jackson Company produces 2 different products, each of which has unlimited demand.If there are 4,000 total available labor hours, and the company desires to maximize its contribution margin, how many units of each product should be produced? $\begin{array}{lr}&\text { Product }\
&X & Z \
\text { Selling price per unit }&\$ 8 & \$ 16 \
\text {Variable cost per unit.  }&\$ 4 & \$ 9 \
\text {Labor hours per unit. }&2 & 4
\end{array}$
A)2,000 units of Product X and 0 units of Product Z
B)0 units of Product X and 1,000 units of Product Z
C)0 units of Product X and 4,000 units of Product Z
D)2,000 units of Product X and 4,000 units of Product Z

Quizplus · Accepted Answer

The contribution margin per labor hour for Product X is higher than for Product Z. Product X has a contribution margin of $4 per unit and requires 2 labor hours, resulting in $2 per labor hour. Product Z has a contribution margin of $7 per unit and requires 4 labor hours, resulting in $1.75 per labor hour. Therefore, to maximize the contribution margin, the company should produce as many units of Product X as possible, which is 2,000 units using all 4,000 labor hours.

The Jackson Company Produces 2 Different Products, Each of Which