Question

Cullumber 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 Stoner, the company’s controller, has gathered the following information about the two products: Dumbbell Rack Weight Bench Selling price per unit $50 $60 Direct materials 18 15 Direct labor 4 8 Variable overhead 3 6 Fixed overhead 5 10 Profit per unit $20 $21 Unit sales demand 4,000 7,000 Machine hours per unit 0.50 0.80

Calculate the total number of machine hours needed to produce enough units to meet the sales demand for the two products. Total number of machine hours

How should Sarah allocate the 6,000 available machine hours between the two products so that Cullumber maximizes its profits? Machine Hours Weight Bench Dumbbell rack

What total contribution margin will Cullumber realize based on your answer to part (b)? Total contribution margin $

Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $70 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,640 units. How should Sarah allocate the 6,000 machine hours based on this new information? Machine Hours Weight Bench Dumbbell rack

Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $70 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,640 units. What total contribution margin will Cullumber earn? Total contribution margin $

After hearing about Sarah’s recommendation to increase the weight bench price to $70, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $57, demand will fall to 1,840 units. How should Sarah allocate the 6,000 machine hours under Scott’s proposal? Machine Hours Weight Bench Dumbbell rack

After hearing about Sarah’s recommendation to increase the weight bench price to $70, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $57, demand will fall to 1,840 units. What total contribution margin will Cullumber earn? Total contribution margin $

Answer 1

Dumbbell weight Bench 7000 5600 7600 (1) Total No. of Machine Hours ? Total Rack unot sales demand 4000 0-8 Machine Howrs pron't 0.5 пacks нот. 2000 (0) Allocation of 6000 Machine Howrse Dumbbell - Rack Bench Selling price 50 GO so variable cost: Direct material (18) Direct Labour variable overhad (3) consbแken S Machine Hours ponunt 0.5 contribution per Machine 50 38.75 Hour E I Ranking 2000 4000 Allocation of machine Howrs (4000X0.5) (Balance) (3) Total contribution Margine; No. of unity su 4000 5000 (2000/0.5) (4000(0.8) Conbukon On She* * 95 - 831 Tola contrubulion $100000 $ 155000 8 255000

(4) Allocation of machine Hours: Dumbbell weight ROCK Bench 50 70 (18) (15) selling price wys variabl cost : maleries LODOV overhad contribution (3) (6) Inl 0.8 $51.25 Machine Hours per unit 0.5 contribution pen Machine $50 HOW Allocation of machine 1988 Howrs 4512 (Balance) (SUOXO-8) (Balance) (5) Total contribalion Hargine : 2976 (1488/05) 5600 (us12/08) No. of units contribution possono Total contribution $50 $231210 $ wees 74400 $305640 6) до cofon of noel Sns нау: selling price 57 129) Dumbbell weight Rack Bench 60 lego variable cost (25) contribution 832 831 Machine Howrs pen unst contribution per $3975 11 Machine Howrsu I Ranking Gogo 4990 Allocation of Taclone Howy (1840x0.5) (6000-920) No. of units 1840 (920/0.5) contrubution per unit 32 Total contribution &aquno 6350 (5080/08) 31 $196850 $226290