Using Differential Analysis to Make Optimal Production Decisions

Utilising Differential Analysis to Make Optimal Production Decisions
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Utilising Differential Analysis to Make Optimal Production Decisions
Dear Supervisor,
I hope this e-mail finds you well. I lately got right here an insightful video titled "Managerial Accounting: Cost Differential Analysis to Make Decisions," which sheds light on the practical functions of differential analysis in managerial decision-making. Implementing this methodology at our company is quintessential to making informed and worthwhile business decisions.
In the video, the speaker referred to several standard options the region managers can use in differential analysis, such as pricing, product mix, make or buy, and limiting factors. Among these, the selection that struck me as most relevant to our modern situation is the "Product Mix" decision. It entails figuring out the most excellent aggregate of merchandise to manufacture to maximise our company's prevalent profitability.
To exemplify how differential analysis can be applied, I would like to cutting-edge a nation of affairs primarily based on our company's combined product decisions. For this illustration, our company produces two products: Product A and Product B. Both merchandises consume comparable uncooked supplies and require the same manufacturing process. The complete reachable manufacturing hours per month are limited, and the enterprise can produce every 800 units of Product A or 600 units of Product B.
Here's a difference between the cost and income statistics for each product:
Product

Selling Price per...