Problem:
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:
|
|
Product A
|
Product B
|
Product C
|
|
Selling price
|
150
|
120
|
38
|
|
Variable costs
|
105
|
60
|
30
|
|
Machine time per unit
|
3 hours
|
2 hours
|
1 hour
|
|
Monthly demand (units)
|
450
|
300
|
750
|
Required:
Determine how the 1,800 hours of machine time should be allocated to the three products to provide the most profitable product mix.