The following analysis of selected data is for each of the two products Hillman

Question

The following analysis of selected data is for each of the two products Hillman Corporation provides. Product X Product Y Per-unit data @ 10,000 units Sales price…………………………………..... $51 $30 Product costs: Variable……………………………………… 14 10 Fixed………………………………………….. 9 6 Selling & administrative expenses: Variable …………………………………….. 7 4 Fixed ………………………………………….. 5 2 In Hillman’s operation, machine hour capacity is the company’s constraining resource. Each unit of X requires 4 machine hours, and each unit of Y requires 2 machine hours. Required: Indicate which product Hillman should emphasize (produce first). Explain why, showing necessary computations.

Explanation / Answer

Ans) Hillman Corporation Product X Y Units 10000 10000 Selling Price $    51.00 $    30.00 Variable cost $    21.00 $    14.00 Fixed Cost manufacturing $       9.00 $       6.00 Fixed Selling Expenses $       5.00 $       2.00 Machine Hours 4 2 Calculate Contribution Margin Per Machine Hours Product X Y Selling Price $    51.00 $    30.00 Variable cost($14+$7) for Product X,($10+$4) $    21.00 $    14.00 Contribution Margin $    30.00 $    16.00 Machine Hours 4 2 Contribution Margin Per Machine Hours $       7.50 $       8.00 Contribution Magin of Product X is greater than Product Y but in case of limited resource i.e machine hours ,Product Y should be Produed first because contribution margin per machine hour of product Y is greater than Prodcut X

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