Raven Co. owns a machine that can produce two specialized products. Production time for Product...
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Raven Co. owns a machine that can produce two specialized products. Production time for Product X is two units per hour and for Product Z is five units per hour. The machines capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the companys output up to a maximum of 3,910 units of Product X and 2,055 units of Product Z. Selling prices and variable costs per unit to produce the products follow.
| $ per unit | Product X | Product Z | ||||||
| Selling price per unit | $ | 12.00 | $ | 7.20 | ||||
| Variable costs per unit | 3.60 | 4.32 | ||||||
Determine the company's most profitable sales mix and the contribution margin that results from that sales mix.
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