Problem 7-8 Additional Processing Decision with a Production Constraint Mega Chemical Company produces ZylexA and a related product called ZylexB. ZylexB is made from a based ZylexA plus additional ingredients. Financial information and resources required for production for the two products follows: Selling price of ZylexB per gallon $ 17.00 Selling price of ZylexA per gallon $ 11.00 Minutes to manufacture a gallon of ZylexA 25 Additional minutes to manufacture a gallon of ZylexB 10 Cost per gallon of resources for manufacturing: Additional ZylexA Cost – ZylexB Material $2.00 $1.75 Labor 2.50 0.50 Variable overhead 2.25 1.10 Both products have been successful and demand for both products is strong and beyond the company’s capacity Since it takes additional time to manufacture ZylexB, the vice president of production is trying to determine whether ZylexB should be produced. Required Which product makes the largest contribution to company profit, given a capacity constraint measured in terms of production time?
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