please answer S8-10 **Product mix decision: Unlimited demand**Storage Solutions produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product is so high that the company can sell as many of each size as it can produce. The same machinery is used to produce both sizes. The machinery is available for only 3,000 hours per period. The company can produce 10 Large bins every hour compared to 15 Regular bins in the same amount of time. Fixed expenses amount to $110,000 per period. Sales prices and variable costs are as follows:| | Regular | Large ||--------------|---------|-------|| Sales price per unit | $8.10 | $10.50|| Variable cost per unit | $3.50 | $4.20 |1. Which product should Storage Solutions emphasize? Why?2. To maximize profits, how many of each size bin should the company produce?3. Given this product mix, what will the company’s operating income be?**Explanation:**- The table provides the sales price per unit and variable cost per unit for both Regular and Large bins.- The task involves determining which product to focus on to maximize profits, how many of each product to produce within the constraints, and calculating the operating income. ### Product Mix Decision: Limited Demand#### Relevant Costs for Short-Term Decisions**Learning Objective 5**Consider Storage Solutions from S8-9. Assume that demand for Regular bins is limited to 36,000 units and demand for Large bins is limited to 25,000 units.1. **How many of each size bin should the company make now?**2. **Given this product mix, what will be the company’s operating income?**3. **Explain why the operating income is less than it was when the company was producing its optimal product mix.**

The contribution margin is calculated by deducting the variable expense from the sales revenue. 1. Calculation of number of units to be produced: Total hours used=36,00015 =2,400 hours Number of large bins that can be produced=600 X 10 = 6,000 bins Therefore, the regular bins would be 36,000. The regular bins would be 6,000. 2. Calculation of operating income: 3. In the present case, the operating income is lower because regular bins are produced lower and it provides more contribution margin higher.

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S8-9 Product mix decis product is so high that the company can sell as many of each size as it cana same machinery is used to produce both sizes. The machinery is available for hours per period. The company can produce 10 Large bins Regular bins in the same amount of time. Fixed expenses amount to $110.000 Sales prices and variable costs are as follows: 222 every hour compa

S8-9 Product mix decis product is so high that the company can sell as many of each size as it cana same machinery is used to produce both sizes. The machinery is available for hours per period. The company can produce 10 Large bins Regular bins in the same amount of time. Fixed expenses amount to $110.000 Sales prices and variable costs are as follows: 222 every hour compa

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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How to solve:S= 1/1.06[1-1/(1.06)^20]/1-1/1.06
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