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

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

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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