Question

4 Exercise 4-51 (Algo) Theory of Constraints (LO 4-5) Pappy's Toys makes two models of a metal toy-Standard and Deluxe. Both models are produced on a single machine. The price and costs of the two models appear as follows. 12 poilers Standard De SES Price per Variable cose per i Machine Hour petit 0.5 1.5 eBook The one machine that used to produce both models has a capacity of 91,000 machine hours per quarter. Fixed manufacturing costs per quarter are $805,000 Required: 2. Suppose that the maximum unit sales in a quarter that Pappy's can achieve IS 202,000 units of each product. How many units of each model should Pappy's produce in a quarter? b. Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 120,500 units of each product. How many units of each model should Peppy's produce in a quarter? Complete this question by entering your answers in the tabs below. Required Reardo Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 120,500 units of each product. How many units of each model should Pappy's produce in a quarter? units Standard Model DeLuxe Model < Required A M < Prev 4 of 10 3 Next >

Answer 1

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Pappy's Toys
Contribution margin per machine hour	Standard	Deluxe	Note
Selling price per unit	45.00	65.00	A
Variable cost per unit	22.00	26.00	B
Contribution per unit ($)	23.00	39.00	C=A-B
Machine hour per unit	0.50	1.50	D
Contribution margin per Machine hour	46.00	26.00	E=C/D

Maximum Contribution margin

As Machine hour is a constraint so for optimal utilization of Machine hours that product will be produced first whose contribution margin per Machine hour is highest.

So Product Standard should be produced first as its Contribution margin per Machine hour is higher, then Product Deluxe will be produced with remaining Machine hours.

Answer a
Optimum production plan:
Machine hours available	91,000.00
Machine hour per unit of Standard	0.50
Units to be produced of Standard	182,000.00
So Standard should be produced 182,000 units and
So Deluxe should not be produced at all.
Answer b
Optimum production plan:
Machine hours available		91,000.00
Demand for Standard	120,500.00
Machine hours for Standard		60,250.00
Machine hours available		30,750.00
Machine hours per unit of Deluxe		1.50
Number of units of Deluxe		20,500.00
So Standard should be produced 120,500 units and
So Deluxe should produced 20,500 units.