ACCA Applied Skills · Performance Management · Make-or-buy and other short-term decisions
Orla Co makes X and Y. Machine hours are limited to 1,000 hours. X: contribution $20 per unit, 2 machine hours, maximum demand 300 units. Y: contribution $27 per unit, 3 machine hours, maximum demand 400 units. What is the maximum total contribution?
Maximum contribution is $9,600. Product X earns more per machine hour, so make its full 300 units using 600 hours. The remaining 400 hours produce 133.33 units of Y, giving $3,600, which added to $6,000 gives $9,600.
- A$6,000
- B$9,000Correct
- C$10,800
- D$9,600
Explanation
Per hour: X $10, Y $9. Make 300 X using 600 hours, leaving 400 hours for 133.33 Y. Contribution = 300x20 = 6,000 plus 133.33x27 = 3,600, total $9,600. Check the options: $9,600 is correct; recompute: 400/3 = 133.33 units x $27 = $3,600; total $9,600.
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