Dunford Company produces three products with the following costs and selling prices:
-If Dunford has a limit of 20,000 direct labor hours but no limit on units sold or machine hours,then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:
A)X,Y,Z
B)Y,Z,X
C)X,Z,Y
D)Z,Y,X

Question

Dunford Company produces three products with the following costs and selling prices: 
-If Dunford has a limit of 20,000 direct labor hours but no limit on units sold or machine hours,then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:
A)X,Y,Z 
B)Y,Z,X 
C)X,Z,Y 
D)Z,Y,X

Quizplus · Accepted Answer

Since there is no limit on units sold or machine hours, the constraint is the limit of 20,000 direct labor hours. The products should be ranked based on their contribution margin per direct labor hour.

Contribution margin per direct labor hour for each product:
X: $20/2 = $10
Y: $16/1.5 = $10.67
Z: $18/2.5 = $7.20

Therefore, the most profitable to least profitable use of direct labor hours is Y, X, Z. So, the answer is B (Y, Z, X).

Dunford Company Produces Three Products with the Following Costs and Selling