Assume that a company currently produces two models of automotive throttle bodies (Throttle Body A and Throttle Body B). You currently have 9,000 hours of aluminum casting capacity. Considering the following sales volume demanded, average Selling Price, and Unit Variable Cost characteristics, make a recommendation for the profit-maximizing product mix of Throttle Body A and Throttle Body B (Please use the template provided):
Throttle Body A |
Throttle Body B |
|
Selling price per unit |
$ 16.00 |
$ 24.00 |
Variable cost per unit |
$ 12.50 |
$ 19.00 |
Units per Casting hour |
50 |
20 |
Quantity Demanded |
300,000 |
90,000 |
Template
Data: | ||
Throttle Body A | Throttle Body B | |
Selling price per unit | $ 16.00 | $ 24.00 |
Variable cost per unit | $ 12.50 | $ 19.00 |
Units per Casting Hour | 50 | 20 |
Quantity Demanded | 300,000 | 90,000 |
Total Casting Hours Required to satisfy Demand | ||
Aluminum Casting Capacity = | 9,000 | Hours |
Calculate Profit-maximizing Product Mix: | ||
Throttle Body A | Throttle Body B | |
Contribution Margin per unit | ||
Contribution Margin per Casting Hour | ||
Planned Production Volume | ||
Total Casting Hours Required for Production Volume |
Throttle Body A |
Throttle Body B |
|
Selling price per unit |
16 |
24 |
Variable cost per unit |
12.50 |
19 |
Units per Casting Hour |
50 |
20 |
Quantity Demanded |
300000 |
90000 |
Total Casting Hours Required to satisfy Demand |
||
Aluminum Casting Capacity = |
9000 |
hours |
Calculate Profit-maximizing Product Mix: |
||
Throttle Body A |
Throttle Body B |
|
Contribution Margin per unit |
$3.50 |
$5 |
Contribution Margin per Casting Hour |
$175 |
$100 |
Planned Production Volume |
300000 |
60000 |
Total Casting Hours Required for Production Volume |
6000 |
3000 |
Contribution Margin per unit = selling price per unit – variable cost per unit
Contribution Margin per Casting Hour = Contribution Margin per unit* Units per Casting Hour
First all units of product having higher Contribution Margin per Casting Hour should be produced. Here Contribution Margin per Casting Hour is higher for Throttle Body A, so the production of number of units required to fulfill complete demand should be done using the required number of casting hours from the available capacity. Then the remaining hours should be used for other product. So all 300000 units of Throttle Body A should be produced using 6000 hours (300000/50) and then remaining 3000 hours (9000-6000) are used to produce Throttle Body B. Using 3000 hours, 60000 units (3000*20) of Throttle Body B can be produced.
Assume that a company currently produces two models of automotive throttle bodies (Throttle Body A and...
Conroy Company manufactures two products-B100 and A200. The company provided the following information with respect to these products: Estimated customer demand (in units) Selling price per unit Variable expenses per unit B100 2,800 $ 1,200 $ 700 A200 2,000 $2,100 $1,200 The company has four manufacturing departments-Fabrication, Molding, Machining, and Assemble & Pack. The capacity available in each department (in hours) and the demands that one unit of each of the company's products makes on those departments is as follows:...
Conroy Company manufactures two products-B100 and A200. The company provided the following information with respect to these products: Estimated customer demand (in units) Selling price per unit Variable expenses per unit B100 2,800 $ 1,200 $ 700 A200 2,000 $2,100 $1,200 The company has four manufacturing departments-Fabrication, Molding, Machining, and Assemble & Pack. The capacity available in each department (in hours) and the demands that one unit of each of the company's products makes on those departments is as follows:...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,250 units of Product TLX and 1,910 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,750 hours per year. Both products are sold to a single customer whe has agreed to buy all of the company's output up to a maximum of 4,700 units of Product TLX and 2,500 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,750 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,700 units of Product TLX and 2,500 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,100 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3,570 units of Product TLX and 1,905 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine's capacity is 2,100 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3,570 units of Product TLX and 4,010 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine's capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3,910 units of Product TLX and 1,840 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,250 units of Product TLX and 1,980 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3,910 units of Product TLX and 2.105 units of Product MTV. Selling prices and variable costs per unit to...