Question

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. Standard Deme 5160 Price per unit Variable cost per unit Machine hours per unit The one machine that used to produce both models has a capacity of 110.000 machine hours per quarter. Feed manufacturing costs per quarter are $900,000 Required: a. Suppose that the maximum unit sales in a quarter that Poppy's can achieve is 240.000 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 190.000 units of each product. How many units of each model should Poppy's produce in a quarter? Complete this question by entering your answers in the the below. Required A Required Suppose that the maximum unit sales in a quarter that Papoy's cancies 240.000 producto of each model should Pappy's produce in a quarter? Standard Mode Deluxe Mode Prov

Answer 1

Calculation of contribution margin per unit

	Standard	Deluxe
Selling price	$140	$160
Variable cost	60	64
Contribution margin	$80	$96
Hour per unit	0.50	1.50
Contribution margin per hour	$160	$64

Because contribution margin per hour of standard is higher in comparison of Deluxe ,therefore Poppy toy should produces Standard units first.

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	Total capacity Hours/Production hours per unit	Units
Standard	110000/0.50 =	220000
Deluxe	0	0

Company could produce just standard unit because of capacity hours .