Answered

Selling price per unit:
[tex]\[
\begin{aligned}
\text{\$252.42} \\
\text{\$543} \\
\text{\$426.30}
\end{aligned}
\][/tex]

Variable cost per unit:
[tex]\[
\begin{aligned}
\text{\$199.92} \\
\text{\$543.75} \\
\text{\$222.84}
\end{aligned}
\][/tex]

Centiliters of compound W:
[tex]\[
\begin{aligned}
8.70 \\
3.60 \\
3.60
\end{aligned}
\][/tex]

Hoang Corporation makes three products that use compound W, the current constrained resource. Data concerning those products are shown.

Which of the following choices ranks the products in order of their current profitability from most profitable to least profitable? (In other words, rank the products in the order in which they should be emphasized.)

A. RP, LH, KI

B. LH, RP, KI

C. RP, KI, LH

D. KI, RP, LH



Answer :

GinnyAnswer
To determine the order of the products based on their current profitability from most profitable to least profitable, we need to calculate the contribution margin per unit of compound W for each product. The contribution margin per unit of compound W is given by:
[tex]\[ \text{Contribution Margin per unit of Compound W} = \frac{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}{\text{Compound W per Unit}} \][/tex]

We can insert the relevant data for each product and calculate the contribution margins as follows:

1. Product RP:
- Selling price per unit: \[tex]$252.42 - Variable cost per unit: \$[/tex]199.92
- Compound W per unit: 8.70 centiliters

[tex]\[ \text{Contribution Margin per unit of Compound W for RP} = \frac{252.42 - 199.92}{8.70} = 6.034 \][/tex]

2. Product LH:
- Selling price per unit: \[tex]$543.75 - Variable cost per unit: \$[/tex]426.30
- Compound W per unit: 3.60 centiliters

[tex]\[ \text{Contribution Margin per unit of Compound W for LH} = \frac{543.75 - 426.30}{3.60} = 32.625 \][/tex]

3. Product KI:
- Selling price per unit: \[tex]$222.84 - Variable cost per unit: \$[/tex]163.80
- Compound W per unit: 3.60 centiliters

[tex]\[ \text{Contribution Margin per unit of Compound W for KI} = \frac{222.84 - 163.80}{3.60} = 16.4 \][/tex]

Now that we have the contribution margins per unit of compound W for each product, we can rank the products from most profitable to least profitable:

- LH: 32.625
- KI: 16.4
- RP: 6.034

Thus, the order of products from most profitable to least profitable is LH, KI, and RP. Therefore, the correct choice is:

D) [tex]\( \text{LH, KI, RP} \)[/tex]