Response to the following problem:
The product mix decision ABC Company produces product X, product Y, and product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 1,200 hours per month. ABC 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:
|
|
Product X
|
Product Y
|
Product Z
|
|
Selling price...........................................
|
$100
|
$80
|
$25
|
|
Variable costs .......................................
|
70
|
40
|
20
|
|
Machine time per unit ............................
|
3 hours
|
2 hours
|
1 hour
|
|
Monthly demand (units) .........................
|
300
|
200
|
500
|
Required:
Determine how the 1,200 hours of machine time should be allocated to the three products to provide the most profitable product mix.