Question

Slavin Corporation manufactures two products, Alpha and Delta. Each product requires time on a single machine has a monthly capacity of 500 hours. Total market demand for the two products is limited to 1 monthly. Slavin is currently producing 110 Alphas and 110 Deltas each month. Cost and machine-usage products are shown in the following table, which Slavin managers use for planning purposes. Alpha $ 121 Total Delta $ 151 33 36 Price Less variable costs per unit Material Labor Overhead Contribution margin per unit Fixed costs Manufacturing Marketing and administrative 18 24 16.5 $ 62.5 18 $ 64 $ 7,600 $ 4,600 $12,200 2.0 2.5 Machine hours per unit Machine hours used Machine hours available Quantity produced Maximum demand Profit 495 500 110 150 $1,715 110 150 Required: a. What is the optimal production schedule for Slavin? In other words, how many Alphas and Deltas shoul produce each month to maximize monthly profit? b. If Slavin produces at the level found in requirement (a), how much will monthly profit increase over the c production schedule?

Answer 1

Answer(1) No of Units of Alpha No of Units of Delta 150 Units 80 Units Alpha $121 Delta $151 18.00 24.00 33.00 36.00 16.50 18.00 Selling Price Less: Variable Cost Direct Material Direct labor Variable manufacturing overhead Contribution margin per unit(A) Machine hour required per unit (B) Contribution margin per machine hour (A/B) Ranking $62.50 $64.00 2.00 2.50 $31.25 Ist $25.60 2nd 500 Hours (150 * 2 hours) 300 Hours 200 Hours Total Machine hours available Less: Hours utilized for Alpha Remaining hours (A) Machine hour required per unit for Delta (B) Units of Delta to be produced(A/B) 2.5 Hours 80 Units Answer(2) Delta Total Alpha 150 80 $62.50 $9,375 $64.00 $5,120 $14,495 No of Units Contribution margin per unit(A) Total Contribution Less: Fixed Cost Manufacturing Marketing and Administrative Profit (7,600) (4,600) $2,295 Profit will increases by $580 ($2,295 - $1,715)