Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s property. Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks are then stacked onto movable metal platforms and rolled into the kiln where they are fired until dry. The dried bricks are then packaged and shipped to retail outlets and contractors. The bottleneck in the production process is the kiln, which is available for 2,850 hours per year. Data concerning the company’s four main products appear below. Products are sold by the pallet. Traditional Brick Textured Facing Cinder Block Roman Brick Gross revenue per pallet $817 $1,396 $652 $946 Contribution margin per pallet $510 $ 650 $416 $485 Annual demand (pallets) 110 130 120 130 Hours required in the kiln per pallet 10 10 4 5 No fixed costs could be avoided by modifying how much is produced of any product. Required: 1a. Calculate the total hours required in the kiln to satisfy demand for all products. 1b. Is there sufficient capacity in the kiln to satisfy demand for all products? Yes No 2a. Calculate the profitability index for the company's four products. 2b. What is the production plan for the year that would maximize the company’s profit? (Round answer to the nearest complete pallet (i.e., 12.3 pallets should be entered as 12.) 3. What would be the total contribution margin for the production plan you have proposed
Problem B-5 Volume Trade-Off Decision; Managing the Constraint [LOB-2, LOB-3]
Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s property. Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks are then stacked onto movable metal platforms and rolled into the kiln where they are fired until dry. The dried bricks are then packaged and shipped to retail outlets and contractors. The bottleneck in the production process is the kiln, which is available for 2,850 hours per year. Data concerning the company’s four main products appear below. Products are sold by the pallet.
| Traditional Brick |
Textured Facing |
Cinder Block |
Roman Brick |
|
| Gross revenue per pallet | $817 | $1,396 | $652 | $946 |
| Contribution margin per pallet | $510 | $ 650 | $416 | $485 |
| Annual demand (pallets) | 110 | 130 | 120 | 130 |
| Hours required in the kiln per pallet | 10 | 10 | 4 | 5 |
No fixed costs could be avoided by modifying how much is produced of any product.
Required:
1a. Calculate the total hours required in the kiln to satisfy demand for all products.
1b. Is there sufficient capacity in the kiln to satisfy demand for all products?
| Yes | |
| No |
2a. Calculate the profitability index for the company's four products.
2b. What is the production plan for the year that would maximize the company’s profit? (Round answer to the nearest complete pallet (i.e., 12.3 pallets should be entered as 12.)
3. What would be the total contribution margin for the production plan you have proposed?
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