Question

ContainAll produces plastic storage bins for household storage needs. i (Click the icon to view additional information.) Sales prices and variable costs are as follows: E: (Click the icon to view the costs.) Read the requirements. Requirement 1. Which product should ContainAll emphasize? Why? Data Table More Info Complete the product mix analysis to determine the contribution margin per machine hour. ContainAll Product Mix Analysis Regular Large Sales price per unit Regular $ 8.90 $ 3.70 Large 10.80 4.10 The company makes two sizes of bins: large (50 gallon) and regular (35 gall Demand for the products is so high that containAll can sell as many of each as it can produce. The company uses the same machinery to produce both The machinery can only be run for 2,800 hours per period. ContainAll can p 11 large bins every hour, whereas it can produce 17 regular bins in the sam amount of time. Fixed costs amount to $130,000 per period. Sales price per unit Variable costs per unit Variable cost per unit Contribution margin per unit Print Done Print Done Units per machine hour Contribution margin per machine hour A Requirements Which product should ContainAll emphasize? Why? ContainAll should emphasize the production of because this product has the higher Requirement 2. To maximize profits, how many of each size bin should ContainAll produce? (Enter a "0" for any zero amounts.) ContainAll should spend machine hours making regular size bins, and machine hours making large size bins. 1. Which product should ContainAll emphasize? Why? 2. To maximize profits, how many of each size bin should ContainAll produce? 3. Given this product mix, what will the company's operating income be? Requirement 3. Given this product mix, what will the company's operating income be? Print Done

Answer 1

* CALCULATIONS PARTICULARS REGULAR LARGE Sales Price Per Unit 8.90 10.80 Variable Cost Per Unit 3.70 4.10 5.20 6.70 CONTRIBUTION PER UNIT Units Per Machine Hour 17.00 11.00 Contribution Per Machine Hr 73.70 88.40 * The ContainAll should focus on Regular size bins as it contributes more. * The company can sell all the bins it produces irrespective of production and hence the company should focus on that goods which increases the income of the company. 1 The ContainAll should emphasize on Regular Bins as it contributes more. 2 To maximise profits the ContainAll should produce Regualr Bins and not Large Bins. ContainAll should emphasize on production of Regular Bins because this product has higher Contribution per Machine Hour. 3 Contribution from total production = 2,800 hours * 88.40 = $ 247,520 ContainAll should spend 2800 machine hours making 47,600 regular size bins and 0 hours making large bins Product Mix = Regular Bins = 100% : Large Bins = 0% * OPERATING INCOME IF REGULAR SIZE BINS ARE PRODUCED:- Operating Income = Total Contribution - Fixed Costs Operating Income = $ 247,520 - $ 130,000 = $ 117,520 %3D %3D