Store−It 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 products is so high that Store−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period. Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period. Sales prices and variable costs are as follows: regular Large Sales price per unit 8.90 10.10 Variable costs per unit 3.20 4.00 Requirement 1. Which product should Store−It emphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour. Requirements: 1. Which product should Store−It emphasize? Why? 2. To maximize profits, how many of each size bin should Store−It produce? 3. Given this product mix, what will the company's operating income be?
Store−It 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 products is so high that Store−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period. Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period. Sales prices and variable costs are as follows: regular Large Sales price per unit 8.90 10.10 Variable costs per unit 3.20 4.00 Requirement 1. Which product should Store−It emphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour. Requirements: 1. Which product should Store−It emphasize? Why? 2. To maximize profits, how many of each size bin should Store−It produce? 3. Given this product mix, what will the company's operating income be?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Store−It 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 products is so high that
Store−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period.
Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period.
Sales prices and variable costs are as follows:
| regular | Large | |
|
Sales price per unit |
8.90 | 10.10 |
| Variable costs per unit | 3.20 | 4.00 |
Requirement 1. Which product should
Store−It
emphasize? Why?Complete the product mix analysis to determine the contribution margin per machine hour.
Requirements:
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1.
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Which product should
Store−It
emphasize? Why? |
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2.
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To maximize profits, how many of each size bin should
Store−It
produce? |
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3.
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Given this product mix, what will the company's operating income be?
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Store-It
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Product Mix Analysis
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Regular
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Large
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Sales price per unit
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Variable cost per unit
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Contribution margin per unit
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Units per machine hour
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Contribution margin per machine hour
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