Please do not give solution in image format thanku Product Pricing and Profit Analysis with Bottleneck OperationsHercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce ofall 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 $14 per process hour.The fixed cost is $391,000. In addition, the cost analyst was able to determine the following information about the three products:High Grade7,000Budgeted units producedTotal process hours per unitFurnace hours per unitHigh GradeGood GradeHigh GradeGood Grade$Regular Grade$$Unit selling price$324$309Direct materials cost per unit$108$97The furnace operation is part of the total process for each of these three products. Thus, for example, 5 of the 17 hours required to process High Grade steel are associated with the furnace.1. Determine the unit contribution margin for each product.Contribution MarginPer Unit$17$5$Good Grade7,000$384$11115Regular Grade2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottleneck.Contribution MarginPer Furnace Hour3Regular Grade7,000124

The contribution margin is calculated as difference between sales and variable costs. The net…

Product Pricing and Profit Analysis with Bottleneck Operations Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce 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 $14 per process hour. The fixed cost is $391,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade 7,000 Good Grade 7,000 15 17 5 Budgeted units produced Total process hours per unit Furnace hours per unit Unit selling price $384 $324 $309 Direct materials cost per unit $111 $108 $97 The furnace operation is part of the total process for each of these three products. Thus, for example, 5 of the 17 hours required to process High Grade steel are associated with the furnace. 1. Determine the unit contribution margin for each product. Regular Grade 7,000 3 12 4

Product Pricing and Profit Analysis with Bottleneck Operations Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce 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 $14 per process hour. The fixed cost is $391,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade 7,000 Good Grade 7,000 15 17 5 Budgeted units produced Total process hours per unit Furnace hours per unit Unit selling price $384 $324 $309 Direct materials cost per unit $111 $108 $97 The furnace operation is part of the total process for each of these three products. Thus, for example, 5 of the 17 hours required to process High Grade steel are associated with the furnace. 1. Determine the unit contribution margin for each product. Regular Grade 7,000 3 12 4

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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