Smythe Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information: $\begin{array}{lcc}&\text { Product X } &\text { Product Y }\
\text { Required labor time per unit (hours) } & 2 & 3 \
\text { Maximum demand (units) } & 6,000 & 8,000 \
\text { Contribution margin per unit } & \$ 5.00 & \$ 6.00 \
\text { Contribution margin per labor hour } & \$ 2.50 & \$ 2.00
\end{array}$ If Smythe follows proper managerial accounting practices, how many units of Product Y should it produce?
A) 8,000.
B) 4,500.
C) 6,000.
D) 5,000.
E) 1,500.

Question

Quizplus · Accepted Answer

Smythe should prioritize Product X because it has a higher contribution margin per labor hour. After producing the maximum demand of 6,000 units of Product X (12,000 hours), 15,000 hours remain. Using these hours for Product Y (3 hours per unit), they can produce 5,000 units.

Smythe Manufacturing Has 27,000 Labor Hours Available for Producing X