Manico Company produces three products-X,Y,& Z-with the following characteristics: The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Question

Manico Company produces three products-X,Y,& Z-with the following characteristics:  The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Quizplus · Accepted Answer

The contribution margin per machine-hour is highest for product X ($12/machine-hour), followed by product Z ($10/machine-hour) and then product Y ($5/machine-hour). Therefore, the company should prioritize filling orders for X and Z before Y. Among X and Z, the company should prioritize filling orders for X first as it has a higher contribution margin per machine-hour. Hence, the best sequence would be:
Orders for X first, Z second, and Y third.

Manico Company Produces Three Products-X,Y,& Z-With the Following Characteristics