Based a variable costing approach

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Reference no: EM1311866

Difference in Profits between two methods of costing.

ABC Company has one machine on which it can produce either of two products, Y or Z. Sales demand is unlimited for both products at current prices. Product Y requires 1 hour of machine time per unit of output and Product Z requires 2 hours of machine time per unit of output. The following information summarizes the per-unit costs of products Y and Z.

	Y	Z
Selling price	$75	$80
DM	30	5
DL	20	10
VOH	10	20
FOH	5	30

a) Based a variable costing approach, how would you maximize profits? Support your answer.

b) Based on a throughput costing approach, how would you maximize profits? Support your answer.

c) Which costing method above provides the best answer to the profit maximization problem and why.

Reference no: EM1311866

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