Assuming that there are no market constraints at all, which product line would maximize profits for the firm? Configure the solver parameters to address the question taking into consideration machine and labor capacity constraints ONLY. Insert a new comment and prepare a brief analysis of the results. (Hint: which resource is the constraining resource?)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Assuming that there are no market constraints at
all, which product line would maximize profits for
the firm?
Configure the solver parameters to address the
question taking into consideration machine and labor
capacity constraints ONLY. Insert a new comment and
prepare a brief analysis of the results. (Hint: which
resource is the constraining resource?)
| Southern Frozen Foods | |||||||||
| Proforma Monthly Segment Analysis | |||||||||
| Sauces | Soups | Casseroles | Unused Capacity | Total | |||||
| Sales volume (cases) | 200 | 300 | 500 | 1,000 | |||||
| Revenue | $6,000 | $30.00 | $12,600 | $42.00 | $25,000 | $50.00 | $43,600 | ||
| Variable costs | 3,200 | 16.00 | 6,600 | 22.00 | 14,000 | 28.00 | 23,800 | ||
| Contribution margin | $2,800 | $14.00 | $6,000 | $20.00 | $11,000 | $22.00 | $19,800 | ||
| Fixed costs: | |||||||||
| Machine-time-related | 420 | 1,050 | 2,625 | 2,905 | 7,000 | ||||
| Labor-time-related | 1,000 | 1,920 | 4,000 | 3,080 | 10,000 | ||||
| Segment margin | $1,380 | $3,030 | $4,375 | $2,800 | |||||
| SG&A expenses | 3,000 | ||||||||
| Operating income | (200) | ||||||||
| Income taxes | - | ||||||||
| Operating income after-tax | (200) | ||||||||
| Segment sales mix (revenue) | 14% | 29% | 57% | ||||||
| Standard operating data | |||||||||
| Machine-time utilization per case (minutes) | 12 | 20 | 30 | ||||||
| Labor-time utilization per case (minutes) | 25 | 32 | 40 | ||||||
| Resource utilization | |||||||||
| Total machine-time utilization | 2,400 | 6,000 | 15,000 | 16,600 | 23,400 | ||||
| Total labor-time utilization | 5,000 | 9,600 | 20,000 | 15,400 | 34,600 | ||||
| Productivity Measures | |||||||||
| CM / minute of machine time | |||||||||
| CM / minute of labor time | |||||||||
| Constraints | |||||||||
| Machine time capacity | 40,000 | ||||||||
| Labor time capacity | 50,000 | ||||||||
| Pessimistic Demand | 200 | 200 | 400 | ||||||
| Market-share limit | 500 | 400 | 700 | ||||||
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