Twitch Mfg. produces a variety of consumer goods sold in retail chains. Twitch is considering producing a new product, and is deciding between two alternatives.
$\bullet$Product A will require 2,000 direct labor hours, 10,000 machine hours, and $70,000 in direct materials each year.
$\bullet$Product B will require 7,000 direct labor hours, 3,000 machine hours, and $80,000 in direct materials each year.
New workers would need to be hired for either project: workers are paid $20 per hour. Electricity for the equipment is $27 per machine hour. The products would be produced on existing manufacturing equipment: depreciation on this equipment is allocated based on machine hours at a rate of $20 per hour. Twitch will manufacture the same number of units, regardless of the product chosen. Both products would be sold for the same price.
Which product would be more profitable to produce?

Question

Twitch Mfg. produces a variety of consumer goods sold in retail chains. Twitch is considering producing a new product, and is deciding between two alternatives. 
$\bullet$Product A will require 2,000 direct labor hours, 10,000 machine hours, and $70,000 in direct materials each year.
$\bullet$Product B will require 7,000 direct labor hours, 3,000 machine hours, and $80,000 in direct materials each year.
New workers would need to be hired for either project: workers are paid $20 per hour. Electricity for the equipment is $27 per machine hour. The products would be produced on existing manufacturing equipment: depreciation on this equipment is allocated based on machine hours at a rate of $20 per hour. Twitch will manufacture the same number of units, regardless of the product chosen. Both products would be sold for the same price.
Which product would be more profitable to produce?

Quizplus · Accepted Answer

The Answer of Twitch Mfg. produces a variety of consumer goods sold in retail chains. Twitch is considering producing a new product, and is deciding between two alternatives. 
$\bullet$Product A will require 2,000 direct labor hours, 10,000 machine hours, and $70,000 in direct materials each year.
$\bullet$Product B will require 7,000 direct labor hours, 3,000 machine hours, and $80,000 in direct materials each year.
New workers would need to be hired for either project: workers are paid $20 per hour. Electricity for the equipment is $27 per machine hour. The products would be produced on existing manufacturing equipment: depreciation on this equipment is allocated based on machine hours at a rate of $20 per hour. Twitch will manufacture the same number of units, regardless of the product chosen. Both products would be sold for the same price.
Which product would be more profitable to produce?

Twitch Mfg ∙\bullet∙ Product a Will Require 2,000 Direct Labor Hours, 10,000 Machine

Twitch Mfg $\bullet$ Product a Will Require 2,000 Direct Labor Hours, 10,000 Machine