Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Турe 5 Турe 10 Туре 20 Revenues $43,000 $49,000 $56,500 Variable cost $34,000 $28,000 $26,500 Fixed cost 8,000 8,000 8,000 Total cost $42,000 $36,000 $34,500 Income from operations $ 1,000 $13,000 $22,000 Number of units + 5,000 + 5,000 + 5,000 Income from operations per unit $0.20 $2.60 $4.40 Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: Туре 5: 6 hours Туре 10: 6 hours Туре 20: 12 hours The Marketing Department is considering a new marketing and sales campaign. Which product should be emphasized in the marketing and sales campaign in order to maximize profitability? Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. Турe 5 Туре 10 Туре 20 Unit contribution margin per furnace hour

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Product Decisions Under Bottlenecked Operations
Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows:
Турe 5
Туре 10
Турe 20
Revenues
$43,000
$49,000
$56,500
Variable cost
$34,000
$28,000
$26,500
Fixed cost
8,000
8,000
8,000
Total cost
$42,000
$36,000
$34,500
Income from operations
$ 1,000
$13,000
$22,000
Number of units
+ 5,000
+ 5,000
+ 5,000
Income from operations per unit
$0.20
$2.60
$4.40
Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of
each product are as follows:
Туре 5:
6 hours
Туре 10:
6 hours
Type 20:
12 hours
The Marketing Department is considering a new marketing and sales campaign.
Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?
Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.
Турe 5
Турe 10
Туре 20
Unit contribution margin per furnace hour
Transcribed Image Text:Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Турe 5 Туре 10 Турe 20 Revenues $43,000 $49,000 $56,500 Variable cost $34,000 $28,000 $26,500 Fixed cost 8,000 8,000 8,000 Total cost $42,000 $36,000 $34,500 Income from operations $ 1,000 $13,000 $22,000 Number of units + 5,000 + 5,000 + 5,000 Income from operations per unit $0.20 $2.60 $4.40 Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: Туре 5: 6 hours Туре 10: 6 hours Type 20: 12 hours The Marketing Department is considering a new marketing and sales campaign. Which product should be emphasized in the marketing and sales campaign in order to maximize profitability? Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. Турe 5 Турe 10 Туре 20 Unit contribution margin per furnace hour
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