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(c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $ (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.

(c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $ (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Because of your love of condiments (especially on a hot dog!), you have been following the happenings at the local bottling plant. Last week, a newspaper article mentioned slowdowns there due to operational issues, which was intriguing since it's a topic you're studying at school right now. Lucky for you, one of the plant managers was already planning a visit to your classroom. As he spoke, he began with a puzzle for your class to solve: "We bottle three primary products in our plant: ketchup, mustard, and relish. Our operations manager has always put priority on our highest contribution margin product. That makes sense, right? But a few months ago, we went 'old school' for our ketchup and started bottling it in classic tall, slender glass bottles. Our customers actually enjoy having to give the bottle a whack to get the product flowing. Since that switch, though, our production department can't seem to meet the budget." The plant manager then showed the class the following information. Ketchup Mustard Relish Current priority based on CM per unit # 1 # 3 # 2 Bottling time (hours per unit) 0.01 0.005 0.02 Variable cost per unit $1.05 $0.75 $1.05 Monthly demand (units) 42,000 25,000 11,000 The plant manager then said: "The puzzle: I'm not sure if we are maximizing the profitability of our bottling capacity anymore. What do you think?" (b) Your answer is correct. Assume that after the switch to glass bottles, the following cost relationship exists for all three products: variable costs are 25% of selling price. Given this information, what must be the current contribution margin per unit for each of the three products? Further, in what order should the company now rank its products in terms of profitability if the bottling activity is its primary constraint? (Round answers to 2 decimal places, eg. 15.25.) Ketchup Mustard Relish Contribution 315 450 157.5 margin/bottling hour New priority rank 2 (c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $4 (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.
Transcribed Image Text:Because of your love of condiments (especially on a hot dog!), you have been following the happenings at the local bottling plant. Last week, a newspaper article mentioned slowdowns there due to operational issues, which was intriguing since it's a topic you're studying at school right now. Lucky for you, one of the plant managers was already planning a visit to your classroom. As he spoke, he began with a puzzle for your class to solve: "We bottle three primary products in our plant: ketchup, mustard, and relish. Our operations manager has always put priority on our highest contribution margin product. That makes sense, right? But a few months ago, we went 'old school' for our ketchup and started bottling it in classic tall, slender glass bottles. Our customers actually enjoy having to give the bottle a whack to get the product flowing. Since that switch, though, our production department can't seem to meet the budget." The plant manager then showed the class the following information. Ketchup Mustard Relish Current priority based on CM per unit # 1 # 3 # 2 Bottling time (hours per unit) 0.01 0.005 0.02 Variable cost per unit $1.05 $0.75 $1.05 Monthly demand (units) 42,000 25,000 11,000 The plant manager then said: "The puzzle: I'm not sure if we are maximizing the profitability of our bottling capacity anymore. What do you think?" (b) Your answer is correct. Assume that after the switch to glass bottles, the following cost relationship exists for all three products: variable costs are 25% of selling price. Given this information, what must be the current contribution margin per unit for each of the three products? Further, in what order should the company now rank its products in terms of profitability if the bottling activity is its primary constraint? (Round answers to 2 decimal places, eg. 15.25.) Ketchup Mustard Relish Contribution 315 450 157.5 margin/bottling hour New priority rank 2 (c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $4 (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.
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