Managerial Accounting

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Rosey Partners: Product to Rent


Rosey Partners makes three products that are all in high demand. The costs per unit for the most recent period are shown below.

Model X Model Y Model Z
Sales price \$160 \$180 \$200
Direct materials \$60 \$60 \$60
Variable labor and overhead \$30 \$30 \$40
Fixed overhead \$40 \$40 \$40
Machine hours used 3.5 4 2.5

The maximum that you can run the current machine is 600 hours per month. However, you can rent additional machine time for $25 per hour. Which product might you consider producing using the rented machine to meet demand in excess of what can be produced with the 600 machine hours?

Highlight the products that would be profitable with the rented machine.

Highlight Answer(s) Below

Model X Model Y Model Z