PR 10-6A Product pricing and profit analysis with bottleneck operations Obj. 3 Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, EXCEL TEMPLATE and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $15 per process hour. The fixed cost is $200,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Regular Grade Grade Budgeted units produced 5,000 5,000 5,000 Total process hours per unit Furnace hours per unit 12 11 10 4 2.5 Unit selling price $280 $270 $250 Direct materials cost per unit $90 $84 $80 The furnace operation is part of the total process for each of these three products. Thus, for example, 4.0 of the 12.0 hours required to process High Grade steel are associated with the furnace. Instructions

PR 10-6A Product pricing and profit analysis with bottleneck operations Obj. 3 Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, EXCEL TEMPLATE and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $15 per process hour. The fixed cost is $200,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Regular Grade Grade Budgeted units produced 5,000 5,000 5,000 Total process hours per unit Furnace hours per unit 12 11 10 4 2.5 Unit selling price $280 $270 $250 Direct materials cost per unit $90 $84 $80 The furnace operation is part of the total process for each of these three products. Thus, for example, 4.0 of the 12.0 hours required to process High Grade steel are associated with the furnace. Instructions

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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