Question

Hi, can somone help me with this question?

Omega Company reported the following information for the company's two products: Product X Product Y Selling price per unit $ 35 $ 25 Variable cost per unit 20 15 Assume that 75,000 machine hours are available; product X takes 4 machine hours to produce, and product Y takes 2 machine hours to produce. The company can sell all it can make of either product. Which of the following statements is true?

A) Product Y should be produced because more of it can be produced.

B) Product Y should be produced because it will produce greater total profit.

C) Product X should be produced because it provides a greater contribution margin.

D) Both products provide the same total profit.

Answer 1

Particulars	Product X	Product Y
Sales	35	25
Less: Variable cost	20	15
Contribution margin per unit (A)	15	10
Machine hours per unit (B)	4	2
Contribution margin per machine hour (A\B)	3.75	5
As the limiting factor is machine hours, product Y should be produced
because its contribution per machine hour is more compared to product X.
Hence, the correct option is B.