Question

Product Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $210,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $113 $242 $647 Unit variable cost 198 $ 44 569 $ 78 Unit contribution margin $ 24 Autoclave hours per unit Total process hours per unit 18 Budgeted units of production 3,200 3 ,2003,200 a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production. Large Medium Small Total Units produced Revenues Variable costs Contribution margin Fixed costs Income from operations b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent. Large Medium Small Contribution margin Autoclave hours per unit Unit contribution margin per production bottleneck hour

Answer 1

a.		Large		Medium		Small		Total
	Units produced	3,200		3,200		3,200
	Revenues	$361,600		$774,400		$2,070,400		$3,206,400
	Variable costs	$284,800		$633,600		$1,820,800		$2,739,200
	Contribution margin	$76,800		$140,800		$249,600		$467,200
	Fixed costs							$210,000
	Income from operations							$257,200
b.		Large		Medium		Small
	Contribution margin	$76,800		$140,800		$249,600
	Autoclave hours per unit	2		4		6
	Unit contribution margin per production bottleneck hour	$38,400		$35,200		$41,600