Soap Company manufactures Soap X and Soap Y and can sell all it can make of eith
ID: 2420998 • Letter: S
Question
Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Hours available to produce the products is the constrained resources. Based on the following data, if Soap could reduce the processing time for X by 10%, which of the following statements is true?
X
Y
$20
$25
14
15
3
5
Possible answers:
It would take 162 minutes to process one unit of X.
There would be no difference in the contribution margin per hour as compared to it before the processing time reduction.
The contribution margin per hour for X would be $2.
Soap Y would still be the most profitable.
X
Y
Sales Price$20
$25
Variable Cost14
15
Hours needed to process3
5
Explanation / Answer
It would take 162 minutes to process one unit of X. Particulars X Y Sales Price 20.00 25.00 Variable Cost 14.00 15.00 Contribution per Unit= Sales - VC 6.00 10.00 Hours needed to process 3.00 5.00 Contribution per Hour 2.00 2.00 Contribution per hour is same for both the products in exiting situation If processing time is reduced by 10% Time for X = 3 * 90% 2.7 Hours 2.7 Hours = 2.7 * 60 Minutes = 162 Minutes Particulars X Y Sales Price 20.00 25.00 Variable Cost 14.00 15.00 Contribution per Unit= Sales - VC 6.00 10.00 Hours needed to process 2.70 5.00 Contribution per Hour 2.22 2.00
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