Answer:
Product A $3.43
Product B $8.32
Product C $6.62
Explanation:
Calculation to determine How much of each product should be produced to maximize net operating income
Product A Product B Product C
Selling price per unit $72.70 $77.10 $76.10
Direct materials $33.10 $40.60 $46.40
Direct labor $22.00 $13.10 $7.20
Variable manufacturing overhead $4.60 $4.40 $3.30
Variable selling cost per unit $1.60 $3.20 $2.00
Total variable cost per unit $61.3 $61.3 $58.9
Contribution margin per unit $9.6 $15.8 $17.2
Product A ($72.70-$61.3=$9.6)
Product B ($77.10-$61.3=$15.8)
Product C ($76.10-$58.9=$17.2)
Mixing minutes per unit 2.8 1.9 2.6
Contribution margin per unit $3.43 $8.32 $6.62
Rank in terms of profitability 3 1 2
Product A ($9.6/2.8=$3.43)
Product B ($15.8/1.9=$8.32)
Product C ($17.2/2.6=$6.62)
Therefore How much of each product should be produced to maximize net operating income will be:
Product A $3.43
Product B $8.32
Product C $6.62
