MA78 Problem: CM Analysis and Scarce Resources - John’s Company

MA78 Problem: CM Analysis and Scarce Resources - John’s Company

John’s Company has two products, X and Y. Both X and Y are produced on the same machine.The maximum operating capacity of the machine is 5,500 hours. X requires 3 hours of machinetime, while Y requires 5 hours of machine time. Other information regarding X and Y:X YSelling price per unit $128.00 $98.00Direct materials per unit 6.00 3.50Direct labour per hour 15.00 15.00Variable manufacturing overhead per direct labour hour 5.50 6.60Predetermined fixed overhead rate per machine hour 4.00 4.00Variable selling & administrative $25.00 $20.00 Product X requires 2.5 direct labour hours and product Y requires 1.5 direct labour hours. Totalfixed manufacturing costs for the year are $22,000. The demand for Product X is 600 units andthe demand for Product Y is unlimited. Fixed selling and administration costs are $8,000.Required:1. What is the optimum production quantity of Product X and Product Y?