Question

ercises Pappy's Toys makes two models of a metal toy-Standard and Deluxe. Both models are produced on a single machine. The price an costs of the two models appear as follows Price per unit Variable cost per unit Machine hours per unit Standard Deluxe 595 $115 42 $ 46 1.5 The one machine that used to produce both models has a capacity of 101,000 machine-hours per quarter. Fixed manufacturing costs per quarter are $855,000. Required: a. Suppose that the maximum unit sales in a quarter that Pappy's can achieve IS 222,000 units of each product. How many units of each model should Pappy's produce in a quarter? b. Suppose that the maximum unit sales in a quarter that Pappy's can achieve Is 125,500 units of each product. How many units of each model should Pappy's produce in a quarter? Complete this question by entering your answers in the tabs below. Required A Required B Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 222,000 units of each product. How many units of each model should pappy's produce in a quarter? Standard Moe De Mode Red B >

Answer 1

Since the bottleneck activity is machine hours we will calculate contribution per hour of each product.

Particulars	Std	deluxe
Price per unit	$95	$115
Variable cost per unit	$42	$46
Contribution per unit	$53	$69
÷ machine hours per unit	0.5	1.50
Contribution per machine hour	$106	$46
Rank	1st	2nd

Since standard product has a higher contribution per machine hour , it would be given priority.

A) If Maximum sales is 222000 units , allocation will be as follows

Particulars	hours
Total hours available	101000
Used in standard product	101000
Remaining	0

Since all the hours available used in production of standard units upto (101000/0.5) 202000 units

There will be no production of deluxe units.

B) If Maximum sales is 125500 units allocation will be as follows

Particulars	hours
Total available	101000
Used in standard product (125500*0.50)	62750
Remaining hours	38250
Used in deluxe	38250
Remaining	0

Hence production will be as follows

Standard - 125500 units

Deluxe = 38250/1.50 = 25500 units

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