| Question: 2 |
A company accepted a contract to provide 30,000 units of Product A and 20,000 units
of Product B. The company's staff developed the following information with regard to
meeting this contract.
Product
A |
Product
B |
Total |
| Selling price |
$75 |
$125 |
| Variable costs |
$30 |
$ 48 |
| Fixed overhead |
$1,600,000 |
| Machine hours required |
3 |
5 |
| Machine hours available |
160,000 |
| Cost if outsourced |
$45 |
$ 60 |
|
The operations manager has identified the following alternatives. Which alternative
should be recommended to management? |
| A. |
Make 30,000 units of Product A, utilize the remaining capacity to make Product B,
and outsource the remainder. |
| B. |
Make 20,000 units of Product A, utilize the remaining capacity to make Product B,
and outsource the remainder. |
| C. |
Make 25,000 units of Product A, utilize the remaining capacity to make Product B,
and outsource the remainder. |
| D. |
Rent additional capacity of 30,000 machine hours, which will increase fixed costs by
$150,000. |
|
the answers is A
really i can not to get why
i solve it to get high contribution margin per hour and give me the answers c so where the mistake
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Sameh Mahmoud Ismail
Accountant
Giza
Egypt
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