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    Profitable Product Mix

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    The product-mix decision. XYZ Company produces Product A, Product B, and Product C. All three products require processing on specialized finishing machines. The capacity of these machines is 1,800 hours per month. XYZ Company wishes to determine the product mix that should be achieved to meet the high demand for each product and provide the maximum profit. Following is information about each product:

    (see chart in attached file)


    Determine how the 1,800 hours of machine time should be allocated to the three products to provide the most profitable product mix.

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    Solution Preview

    In such situation where there is a constraint, we look at the contribution margin per unit of constraint to decide the product mix. Here the constraint is machine hours. We find the contribution margin ...

    Solution Summary

    The solution explains how a constrained resource be used to determine the product mix for maximum profitability.