Question

Required information The following information applies to the questions displayed below.) Clarke Corporation manufactures three products (X-1, X-2, and X-3) utilizing, in one of the processes, a single machine for all products. Data on the individual products follow. 164 $ Price per unit Variable cost per unit Machine hours per unit Maximum units demand per period 1.0 380,000 264 141 2.5 182,000 528 304 4.0 68,000 The single machine used for all three products has a maximum capacity of 818,000 hours per period. Required: a. How many units of each product should be produced each perlod? b. A local engineering firm has suggested to Clarke that it might be able to increase the capacity on the machine. What is the maximum Clarke would be willing to pay for an increase of twenty (20) machine hours? c. Suppose the maximum capacity on the machine was 444,000 hours (instead of 818,000 hours). What is the maximum Clarke would be willing to pay for an increase of twenty (20) machine hours? d. At what capacity (in machine hours) would the machine no longer be a bottleneck? Complete this question by entering your answers in the tabs below. DIA D R Dari Darusian < Prey 10 of 10 !!! Next >

Answer 1

Product with maximum contribution margin per unit of bottleneck should be produced first
Calculation of contribution margin per machine hour
	X-1	X-2	X-3
Price per unit	164	264	528
Variable cost per unit	82	141	304
Contribution Margin per Unit	82	123	224
Machine hours per unit	1	2.5	4
Contribution Margin per Machine hour	82	49.2	56
Production Schedule
Product	Number of Units	Machine Hours per Unit	Total Machine Hours
X-1	380,000	1	380,000
X-2	66,400	2.5	166,000
X-3	68,000	4	272,000
		Total	818,000
Maximum for increase = contribution margin earned = 20*49.2 = $984
c.Increased machine hours will be used to produce X-3, hence amount paid = 20*56 = $1,120
d.Capacity in machine hours = 380,000+272,000+182,000*2.5 = 1,107,000 hours