Question

U S Heel System Announcements CALCULATOR PEINT VERSION BACK NEXT Problem 8-26 Marwick Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this purpose. The machines have a maximum capacity of 6,000 machine hours, and no other products that the company makes use these machines Sarah Jacob, the company's operations manager is preparing the production schedule for the coming month and can't seem to find enough machine time to produce enough units to meet the customer demand that the marketing department has included in the sales budget. Michael Stone the company's controller, has gathered the following information about the two products: Dumbbell Rack $50 Weight Bench $61 15 Selling price per unit Direct materials Direct labor Variable overhead Fixed overhead Profit per unit Unit sales demand Machine hours per unit 10 7.000 4,000 0.5 0.8 Your answer is correct Calculate the total number of machine hours needed to produce enough units to meet the sales demand for the two products, 7600 Total number of machine hours SHOW SOLUTION LINK TO TEXT

Answer 1

a) Total No. of Machine Hours 7600 Dumbbell Weight Total Bench rack Units demand 4000 7000 Machine hours per Unit 0.8 0.5 Total Machine hours 7600 2000 5600 b) Machine Hours Weight Bench 4640 Dumbbell Rock 1360 As the contribution margin per machine hour is high for Weight bench, hence the same should be produced first. Later Dumbbell rack should be produced with the remining machine hours available. Machine hours required to produce weight bench Remaining machine hours to be alloted to Dumbbell rack 6000 -4640 1360 machine hours 4640 machine hours 5800 0.8

Working Notes Computation of Contribution Margin per Machine Hour Dumbbell Weight rack Bench Selling Price Less variable cost per unit Contribution margin per unit No. of machine hours per unit Contribution margin per machine hour Ranking based on contribution margin per machine hour 50.00 $ 69.00 (27.00) 23.00 $ (29.00) $ 40.00 0.5 0.8 46.00 $ 50.00 Second First Variable cost per Unit Dumbbell Weight rack Bench Direct materials Direct labour Variable Overhead 20.00 $ $ 15.00 4.00 $ $ 8.00 3.00 S 6.00 Total Variable cost per unit $ 27.00 $ 29.00

Total Contribution Margin $294,560 c) Dumbbell Weight rack Bench Total Contribution Margin per Unit 23.00 $ $ 40.00 2720 5800 Units demand Total Contribution Margin $62,560 $ 232,000 $ 294,560 Working Note: No. of Dumbbell rack to be made No. of machine hours available /Machine houras required per unit 1360/0.5 2720 units Machine Hours P Dumbbell rack 1000 Weight Bench 5000 As the contribution margin per machine hour is high for Dumbbell rack, hence the same should be produced first. Later weight bench should be produced with the remining machine hours available.

Machine hours required to produce dumbbell rack Remaining machine hours to be alloted to Dumbbell rack 6000- 1000 5000 machine hours 2000 *0.5 = 1000 machine hours Working Notes: Computation of Contribution Margin per Machine Hour Dumbbell Weight rack Bench Selling Price Less variable cost per unit Contribution margin per unit No. of machine hours per unit Contribution margin per machine hour Ranking based on contribution margin per machine hour 56.00 $ $ 61.00 (27.00) $ (29.00) $ $ 29.00 $ 32.00 0.5 0.8 58.00 $ 40.00 First Second Variable cost per Unit Dumbbell Weight rack Bench 20.00 $ $ 4.00 $ Direct materials 15.00 Direct labour 8.00 Variable Overhead 3.00 $ 6.00 Total Variable cost per unit 27.00 $ 29.00

Total Contribution Margin $ 258,000 e) Dumbbell Weight rack Bench Total Contribution Margin per Unit Units demand 29.00 $ 32.00 2000 6250 Total Contribution Margin $58,000 $ 200,000 258,000 Working Note No. of weight bench to be made No. of machine hours available / Machine houras required per unit 5000 /0.8 6250 units