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ta time. Details for ea X D0 units

ta time. Details for ea X D0 units

FINANCIAL ACCOUNTING
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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5. The Cool Million Corporation's plant manufactures two different products: X and Y. The plant has three different machines: A, B, and C. Each performs different tasks and can work on only one unit of material at a time. Details for each product are shown in the table below: Product Y Demand Per Week 200 units 100 units Selling Price Machine Operation Required Operation Times in Minutes $150 $160 А, В, С 20, 15, 15 RM-1, RM-2 RM-1 = $40/unit, RM-2 or RM-3 = В, В, С 15, 15, 15 RM-2, RM-3 Raw Materials Needed Raw Materials costs $20/unit Each product uses raw materials with costs as shown in the above table where the process- ing times and the machine required for each operation are also shown. Each machine is available 4,800 minutes per week. There are no system foulups. Demand is deterministic (i. e., no uncertainty). Operating expenses, including labor (but excluding raw materials) total $12,000 per week. a. Assuming market is not a constraint, which machine (resource) is the constraint in this plant? Why? b. With the machine (resource) identified as constraint in (a) above, what product mix provides the highest profit? How much is this maximum profit? c. In order to exploit the constraint identified in (b) above, is market demand a con- straint for maximizing profits? Why or why not?
Transcribed Image Text:5. The Cool Million Corporation's plant manufactures two different products: X and Y. The plant has three different machines: A, B, and C. Each performs different tasks and can work on only one unit of material at a time. Details for each product are shown in the table below: Product Y Demand Per Week 200 units 100 units Selling Price Machine Operation Required Operation Times in Minutes $150 $160 А, В, С 20, 15, 15 RM-1, RM-2 RM-1 = $40/unit, RM-2 or RM-3 = В, В, С 15, 15, 15 RM-2, RM-3 Raw Materials Needed Raw Materials costs $20/unit Each product uses raw materials with costs as shown in the above table where the process- ing times and the machine required for each operation are also shown. Each machine is available 4,800 minutes per week. There are no system foulups. Demand is deterministic (i. e., no uncertainty). Operating expenses, including labor (but excluding raw materials) total $12,000 per week. a. Assuming market is not a constraint, which machine (resource) is the constraint in this plant? Why? b. With the machine (resource) identified as constraint in (a) above, what product mix provides the highest profit? How much is this maximum profit? c. In order to exploit the constraint identified in (b) above, is market demand a con- straint for maximizing profits? Why or why not?
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