Question

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 $147,000 for the company as a whole. In addition, the following information is available about the three products:

	Large		Medium		Small
Unit selling price	$94		$297		$473
Unit variable cost	(74)		(243)		(416)
Unit contribution margin	$ 20		$ 54		$ 57
Autoclave hours per unit	2		4		6
Total process hours per unit	6		12		12
Budgeted units of production	2,500		2,500		2,500

a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production.

	Large	Medium	Small	Total
Units produced
Revenues	$	$	$	$
Variable costs
Contribution margin	$	$	$	$
Fixed costs
Operating income				$

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	2500	2500	2500
Revenues	235000	742500	1182500	2160000
Variable costs	185000	607500	1040000	1832500
Contribution margin	50000	135000	142500	327500
Fixed costs				147000
Operating income				180500
b
	Large	Medium	Small
Contribution margin	20	54	57
Autoclave hours per unit	2	4	6
Unit contribution margin per production bottleneck hour	10.00	13.50	9.50