Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Hours available to produce the products is the constrained resources. Based on the following data, if Soap could reduce the processing time for X by 10%, which of the following statements is true? $\begin{array}{|c|c|l|}
\hline\mathrm{Y} & \mathrm{X}\
\hline \$ 25 & \$ 20 & \text { Sales Price } \
\hline 15 & 14 & \text { Variable Cost } \
\hline 5 & 3 & \text { Hours needed to process } \
\hline
\end{array}$
A) It would take 162 minutes to process one unit of X.
B) There would be no difference in the contribution margin per hour as compared to it before the processing time reduction.
C) The contribution margin per hour for X would be $2.
D) Soap Y would still be the most profitable.

Question

Quizplus · Accepted Answer

Reducing the processing time for X by 10% would reduce the time needed to process one unit of X from 3 hours to 2.7 hours (3 hours * 0.9 = 2.7 hours). This is equivalent to 162 minutes (2.7 hours * 60 minutes/hour = 162 minutes).

Soap Company Manufactures Soap X and Soap Y and Can