Question

Brann, located in Port St. Lucie, Florida, produces two lines of electric toothbrushes: deluxe and standard. Because Brann can sell all the toothbrushes it can produce, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data:

Per Unit Deluxe Toothbrush Standard Toothbrush Sales price 88 $ 20 Variable costs 68 $ Contribution margin Contribution margin ratio 77.3% 70.4%

After expansion, the today will have a production capacity of 4.900 machine hours pet month the plant can manufacture other 45 standard eclectic toothbrushes or 40 deluxe electric toothbrushes per macrons hour

Requirements:

1. Identify the constraining factor for Brann.
2. Prepare an analysis to show which product line to emphasize.

Answer 1

a]	The constraining factor is machine hours, which, is limited to 4900 per month.
b]	As the constraining factor is machine hours, the product which gives the higher
	contribution margin per machine hour is to be selected.
		Deluxe	Standard
	Contribution margin per unit	$               68.00	$             38.00
	Number of units manufactued per hour	40	45
	Contribution margin per hour	$         2,720.00	$       1,710.00
	Since. Deluxe gives the higher contribution margin per machine hour, it is to
	be preferred [Subject to the condition that the demand for Deluxe is not
	constrained, which is so, as stated in the beginning para of the question.