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Blue Corporation uses a machine to produce products Y and Z. Currently, Blue sells these products in bundles of 2 product Y and 1 product Z per bundle. Given Blue's current capacity, they are able to use the machine for a total of 2,000 hours per year. Information on product Y and Z is presented below:
Product Y Product Z
Sales Price $1,000 $1,500
Variable Costs $300 $600
Machine hours per unit 7 hours 10 hours
Assuming that Blue will sell every unit that it produces (this is one of the weaknesses of CVP analysis), should Blue continue selling in bundles of Y and Z, sell on product Y or sell only product Z? Why?
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