Peyton Company manufactures Phone X and Phone Y. Peyton can sell all it can make of either. Based on the following data, assuming the number of hours is a constraint, which statement is true?

Question

Peyton Company manufactures Phone X and Phone Y. Peyton can sell all it can make of either. Based on the following data, assuming the number of hours is a constraint, which statement is true?​

Quizplus · Accepted Answer

The profit per unit for Phone X is $100, and the profit per unit for Phone Y is $80. However, we need to consider the number of hours required to manufacture each phone. Phone X requires 2 hours of labor, while Phone Y requires only 1 hour of labor.

If we divide the profit by the number of hours, we get a measure of profitability per hour of labor. 
Profit per hour for Phone X: $100 / 2 hours = $50/hour
Profit per hour for Phone Y: $80 / 1 hour = $80/hour

Therefore, Phone Y is more profitable per hour of labor, and the statement that is true is B: Y is more profitable than X.

Note that we do not have enough information to determine if either phone is actually profitable overall, but we can determine which phone is more profitable per hour of labor.

Peyton Company Manufactures Phone X and Phone Y