Question

Blossom, Inc., is a small company that manufactures three versions of patio tables. Unit information for its products follows: Table A $ 52 10 2 4 Table B $ 56 11 Table C Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 70 12 4 8 4 4 5 5 5 Required number of labor hours Required number of machine hours 0.5 0.5 2.50 1.0 4.0 2.0 Blossom has determined that it can sell a limited number of each table in the upcoming year. Expected demand for each model follows: Table A Table B Table C 50,000 units 25,000 units 25,000 units Required: 1. Suppose that direct labor hours has been identified as the bottleneck resource. Determine how Blossom should prioritize production by rank ordering the products from 1 to 3. Product Ranking Table A Table B Table C np

Answer 1

Answer = 1
	CALCULATION OF RANKING OF PRODUCTS IF DIRECT LABOR HRS ARE BOTTLENECK RESOURCES
		Table A	Table B	Table C
	Sales Price	$                            52	$                             56	$                        70
	Less: Variale Costs:
	Direct Materials	$                            10	$                             11	$                        12
	Direct Labor	$                               2	$                                4	$                          8
	Variable manufacturing overhead	$                               5	$                                5	$                          5
	Contribution margin per unit	$                            35	$                             36	$                        45
	Divide By	"/" By	"/" By	"/" By
	Number of labor hours	0.50	0.50	1.00
	Contribution margin per hours	70.00	72.00	45.00
	Ranking of the products	2 nd	1 st	3 rd
	Product	Ranking
	Table A	2 nd
	Table B	1 st
	Table C	3 rd
Answer = 2
	Product	Units Prodcued	Hrs
	Table A (50,000 units X 0.50 Hrs )	50,000	25000
	Table B (25,000 Units X 0.50 Hrs)	25,000	12500
	Table C (Balance 12,500 units X 1 Hrs)	12,500	12500
	Total	87,500	50,000
Answer = 3
	CALCULATION OF RANKING OF PRODUCTS IF DIRECT LABOR HRS ARE BOTTLENECK RESOURCES
		Table A	Table B	Table C
	Sales Price	$                            52	$                             56	$                        70
	Less: Variale Costs:
	Direct Materials	$                            10	$                             11	$                        12
	Direct Labor	$                               2	$                                4	$                          8
	Variable manufacturing overhead	$                               5	$                                5	$                          5
	Contribution margin per unit	$                            35	$                             36	$                        45
	Divide By	"/" By	"/" By	"/" By
	Number of Machine Hours	4.00	2.50	2.00
	Contribution margin per Machine Hours	8.75	14.40	22.50
	Ranking of the products	3rd	2 nd	1 st
	Product	Ranking
	Table A	3 rd
	Table B	2 nd
	Table C	1 st
Answer = 4
	Product	Units Prodcued	Hours Utilized
	Table A (32,875 units X 4.00 Hrs ) Balance Hours	32,875	1,31,500
	Table B (25,000 Units X 2.50 M Hrs)	25,000	62,500
	Table C ( 25,000 units X 2 M Hrs)	25,000	50,000
		82,875	2,44,000