Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products:$\begin{array}{lrrrrr}&X&Y&Z\
\text { Demand in units } & 160 & 150 & 140 \
\text { Selling price per unit } & \$ 130 & \$ 160 & \$ 150 \
\text { Raw materials costs per unit } & \$ 65 & \$ 80 & \$ 90 \
\text { Labor time in minutes per unit } & 10 & 20 & 10
\end{array}$Which is the most profitable product if there is a constraint on labor time, so that total demand for all products cannot be met?
A) Product X.
B) Product Y.
C) Product Z.
D) More than one of the products has equal total throughput margin per labor minute.
E) There isn't enough information to answer the question.

Question

Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products:$\begin{array}{lrrrrr}&X&Y&Z\
\text { Demand in units } & 160 &  150 &  140 \
\text { Selling price per unit } & \$ 130 & \$ 160 & \$ 150 \
\text { Raw materials costs per unit } & \$  65 & \$ 80 & \$  90 \
\text { Labor time in minutes per unit } & 10 &  20 &  10
\end{array}$Which is the most profitable product if there is a constraint on labor time, so that total demand for all products cannot be met?
A) Product X.
B) Product Y.
C) Product Z.
D) More than one of the products has equal total throughput margin per labor minute.
E) There isn't enough information to answer the question.

Quizplus · Accepted Answer

To determine the most profitable product under a labor time constraint, we calculate the throughput margin per labor minute for each product. The throughput margin is the selling price minus the raw materials cost. Then, we divide this by the labor time in minutes per unit to find the throughput margin per labor minute.For Product X: $(\$130 - \$65) / 10 = \$6.5$ per minuteFor Product Y: $(\$160 - \$80) / 20 = \$4$ per minuteFor Product Z: $(\$150 - \$90) / 10 = \$6$ per minuteProduct X has the highest throughput margin per labor minute, making it the most profitable product under a labor time constraint.

Suzy Co Produces and Sells Three Products (X, Y, and Z)