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! Required information Problem 4-75 and 4-76 (Static) (LO 4-4,5) [The following information applies to the questions displaye
Required information Required: a. How many units of each product should be produced each period? b. A local engineering firm
Required: a. How many units of each product should be produced each period? b. A local engineering firm has suggested to Clar
Required information Required: a. How many units of each product should be produced each period? b. A local engineering firm
Required information Required: a. How many units of each product should be produced each period? b. A local engineering firm
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Answer #1
a. X-1 X-2 X-3
Price per unit 100 200 400
Less:Variable cost per unit 50 120 240
Contribution margin per unit a 50 80 160
Machine hours per unit b 1 2.5 4
Contribution margin per machine hour a/b 50 32 40
Rank 1 3 2
First Preference should be given to X-1
Total hours available=500000 hours
Demand for X-1=300000 units
Machine hours per unit=1
Machine hours used for X-1=300000*1=300000 hours
Balance machine hours available=500000-300000=200000
Second Preference should be given to X-3
Demand for X-3=20000 units
Machine hours per unit=4
Machine hours used for X-3=20000*4=80000 hours
Balance machine hours available=200000-80000=120000
last Preference should be given to X-2
Machine hours per unit=2.5
Units of X-2 can be produced=120000/2.5=48000
X-1 300000 units
X-2 48000 units
X-3 20000 units
b. Maximum amount payable=20*Contribution margin per hour for product with unfulfilled demand (X-2)=20*32=$ 640
c. First Preference should be given to X-1
Total hours available=300000 hours
Demand for X-1=300000 units
Machine hours per unit=1
Machine hours used for X-1=300000*1=300000 hours
Balance machine hours available=300000-300000=0
Second Preference should be given to X-3
Maximum amount payable=20*Contribution margin per hour for product with unfulfilled demand (X-3)=20*40=$ 800
d. Capacity that is no longer a bottleneck=Machine hour which fulfills the demand of all products
Capacity:
Demand Machine hours per unit Total machine hours
a b a*b
X-1 300000 1 300000
X-2 150000 2.5 375000
X-3 20000 4 80000
Total 755000
Capacity=755000 machine hours
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