Speedy Co. manufactures four products. Direct materials and direct labour are available in sufficient quantities, but machine capacity is limited to 3,000 hours. Cost and revenue data for the four products are given below:
A B C D
Selling price per unit 36 42 46 56
Variable cost 19 16 25 37
Units produced per 3 4 2 3
Based on your calculations, which of the four products which is the most profitable for Speedy Co.?
A. Product A.
B. Product B.
C. Product C.
D. Product D.
We are not given any information about fixed costs so we must assume they are constant across each of the four products therefore we can disregard them.
To start subtract selling ...
This solution is a sample problem with a solution of how to calculate product profit from cost and revenue data for several products and determining the most profitable to manufacture of the mix, given the findings.