Portal Corporation produces the same power genera- tor in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available for the two plants: Page Layout Formulas Data Review Home Insert View D. A Peoria $150.00 Moline 2 Selling price 3 Variable manufacturing cost per unit 4 Fixed manufacturing cost per unit 5 Variable marketing and distribution cost per unit 6 Fixed marketing and distribution cost per unit 7 Total cost per unit 8 Operating income per unit 9 Production rate per day 10 Normal annual capacity usage 11 Maximum annual capacity $150.00 $72.00 30.00 $88.00 15.00 14.00 14.00 19.00 14.50 135.00 131.50 $ 15.00 400 units 240 days 300 days $ 18.50 320 units 240 days 300 days All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days. When the number of working days exceeds 240, overtime charges raise the variable manufacturing costs of additional units by $3.00 per unit in Peoria and $8.00 per unit in Moline. Portal Corporation is expected to produce and sell 192,000 power generators during the coming year. Wanting to take advantage of the higher operating income per unit at Moline, the company's production manager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline op- erates at maximum capacity (320 units per day x 300 days) and Peoria operates at its normal volume (400 units per day x 240 days).
Portal Corporation produces the same power genera- tor in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available for the two plants: Page Layout Formulas Data Review Home Insert View D. A Peoria $150.00 Moline 2 Selling price 3 Variable manufacturing cost per unit 4 Fixed manufacturing cost per unit 5 Variable marketing and distribution cost per unit 6 Fixed marketing and distribution cost per unit 7 Total cost per unit 8 Operating income per unit 9 Production rate per day 10 Normal annual capacity usage 11 Maximum annual capacity $150.00 $72.00 30.00 $88.00 15.00 14.00 14.00 19.00 14.50 135.00 131.50 $ 15.00 400 units 240 days 300 days $ 18.50 320 units 240 days 300 days All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days. When the number of working days exceeds 240, overtime charges raise the variable manufacturing costs of additional units by $3.00 per unit in Peoria and $8.00 per unit in Moline. Portal Corporation is expected to produce and sell 192,000 power generators during the coming year. Wanting to take advantage of the higher operating income per unit at Moline, the company's production manager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline op- erates at maximum capacity (320 units per day x 300 days) and Peoria operates at its normal volume (400 units per day x 240 days).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Determine how the production of 192,000 units should be allocated between the Peoria and Moline plants to maximize operating income for Portal Corporation. Show your calculations.
Transcribed Image Text:Portal Corporation produces the same power genera-
tor in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available
for the two plants:
Page Layout
Formulas
Data
Review
Home
Insert
View
D.
A
Peoria
$150.00
Moline
2 Selling price
3 Variable manufacturing cost per unit
4 Fixed manufacturing cost per unit
5 Variable marketing and distribution cost per unit
6 Fixed marketing and distribution cost per unit
7 Total cost per unit
8 Operating income per unit
9 Production rate per day
10 Normal annual capacity usage
11 Maximum annual capacity
$150.00
$72.00
30.00
$88.00
15.00
14.00
14.00
19.00
14.50
135.00
131.50
$ 15.00
400 units
240 days
300 days
$ 18.50
320 units
240 days
300 days
All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days.
When the number of working days exceeds 240, overtime charges raise the variable manufacturing costs of
additional units by $3.00 per unit in Peoria and $8.00 per unit in Moline.
Portal Corporation is expected to produce and sell 192,000 power generators during the coming year.
Wanting to take advantage of the higher operating income per unit at Moline, the company's production
manager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline op-
erates at maximum capacity (320 units per day x 300 days) and Peoria operates at its normal volume
(400 units per day x 240 days).
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