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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: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 + 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 + 5,000 +5,000 $ 2.60 $4.40 Operating income Number of units Operating income per unit 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: 6 hours 6 hours 12 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.

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: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 + 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 + 5,000 +5,000 $ 2.60 $4.40 Operating income Number of units Operating income per unit 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: 6 hours 6 hours 12 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.

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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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: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 ÷ 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost Operating income Number of units $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 ÷ 5,000 ÷ 5,000 $ 2.60 $4.40 Operating income per unit 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: 6 hours 6 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. 12 hours
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: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 ÷ 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost Operating income Number of units $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 ÷ 5,000 ÷ 5,000 $ 2.60 $4.40 Operating income per unit 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: 6 hours 6 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. 12 hours
Type 5 Type 10 Type 20 Unit contribution margin per furnace hour Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?
Transcribed Image Text:Type 5 Type 10 Type 20 Unit contribution margin per furnace hour Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?
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