Question

DO IT! 19-3 Zoom Corporation manufactures and sells three different types of binoculars. They are referred to as Good, Better, and Best binoculars. Grinding and polishing time is limited. More time is required to grind and polish the lenses used in the Better and Best binoculars. Additional information is provided below. Selling price Variable costs and expenses Contribution margin Grinding and polishing time required Good $90.00 50.00 $40.00 0.5 hrs Product Better $330.00 180.00 $150.00 1.5 hrs Best $900.00 480.00 $420.00 6 hrs (a) Ignoring the time constraint, what strategy would appear to be optimal? (b) What is the contribution margin per unit of limited resource for each type of binocular? (C) If additional grinding and polishing time could be obtained, how should the addi- tional capacity be used?

Answer 1

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Zoom Corporation
Answer a
	Good	Better	Best	Note
Sell price	90.00	330.00	900.00
Less: Variable costs	50.00	180.00	480.00
Contribution per unit	40.00	150.00	420.00	E

If time is not constraint then Company should focus on making "Best Product".

Answer b	Good	Better	Best	Note
Contribution per unit	40.00	150.00	420.00	See E
Grinding and Polishing time	0.50	1.50	6.00	F
Contribution per minute	80.00	100.00	70.00	G=E/F
Rank	2	1	3

Answer c

If additional Grinding and Polishing time is obtained then it should be used to make product "Best" as its has lowest contribution per minute so it should be made last.