The Smith Company has one machine on which it can produce either of two products. X and Y. Sales demand for both products is such that the machine could operate at full lcapacity on either of the products, and Smith can sell all output at curren prices. Product X requires one hour of machine time per unit of output and Product Y requires two hours of machine timeper unit of output. The following information summarizes the per-unit cash inflow and costs of Products X and Y. Product X Product Y Selling Price $30 $55 Materials $ 4 $ 6 Labor 1 3 Allocated Portion of fixed cost $14 $26 Total Cost per Unit $19 $35 Gross Margin per Unit $11 $20 Selling costs are the same whether Smith productes Product X or Y, or both; you may ignore them. Should Smith Compny prduce Product X, Product Y, or some mixture of both? Why?
The Smith Company has one machine on which it can produce either of two products. X and Y. Sales demand for both products is such that the machine could operate at full lcapacity on either of the products, and Smith can sell all output at curren prices. Product X requires one hour of machine time per unit of output and Product Y requires two hours of machine timeper unit of output.
The following information summarizes the per-unit
|
|
Product X |
Product Y |
|
Selling Price |
$30 |
$55 |
|
Materials |
$ 4 |
$ 6 |
|
Labor |
1 |
3 |
|
Allocated Portion of fixed cost |
$14 |
$26 |
|
Total Cost per Unit |
$19 |
$35 |
|
Gross Margin per Unit |
$11 |
$20 |
Selling costs are the same whether Smith productes Product X or Y, or both; you may ignore them. Should Smith Compny prduce Product X, Product Y, or some mixture of both? Why?
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