Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour, and 600 units of Z per hour.
Selling prices and material costs for each product are as follows.
|
Product
|
Selling price
|
Material cost
|
Throughput contribution
|
|
|
$ per unit
|
$ per unit
|
$ per unit
|
|
X
|
150
|
80
|
70
|
|
Y
|
120
|
40
|
80
|
|
Z
|
300
|
100
|
200
|
Conversion costs are $720,000 per day.
Required
(a) Calculate the profit per day if daily output achieved is 6,000 units of X, 4,500 units of Y and 1,200 units of Z.
(b) Calculate the TA ratio for each product.
(c) In the absence of demand restrictions for the three products, advise Corrie's management on the optimal production plan.