Production Bottleneck: Production Bottleneck is a situation of constraint in the manufacturing company, where the demand for goods is higher, than the production capacity of the company. In this situation the production or contribution per bottleneck hour is calculated to determine the value of a product. To Determine: The contribution margin per unit for each product of Company HS.

Question

2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottleneck. Contribution Margin Per Furnace Hour High Grade 41.5 X Good Grade $ 47.33 X Regular Grade $ 33 X Feedback V Check My Work 1. For each grade, subtract the variable conversion cost and direct materials cost per unit from the selling price. 2. For each grade, divide the unit contribution margin by the furnace (bottleneck) hours per unit.

Answer 1

Question

Chapter 25, Problem 25.6APR

a)

To determine

Production Bottleneck: Production Bottleneck is a situation of constraint in the manufacturing company, where the demand for goods is higher, than the production capacity of the company. In this situation the production or contribution per bottleneck hour is calculated to determine the value of a product.

To Determine: The contribution margin per unit for each product of Company HS.

b)

To determine

The relative product profitability per unit for each product of Company HS.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottleneck. Contribution Margin Per Furnace Hour High Grade 41.5 X Good Grade $ 47.33 X Regular Grade $ 33 X Feedback V Check My Work 1. For each grade, subtract the variable conversion cost and direct materials cost per unit from the selling price. 2. For each grade, divide the unit contribution margin by the furnace (bottleneck) hours per unit.

Product Pricing and Profit Analysis with Bottleneck Operations Hercules 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 of 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 $10 per process hour. The fixed cost is $513,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 3,000 3,000 3,000 Total process hours per unit 15 13 10 Furnace hours per unit 4 3 5 Unit selling price $299 $247 $264 Direct materials cost per unit $113 $105 $99 The furnace operation is part of the total process for each of these three products. Thus, for example, 4 of…

Product Pricing and Profit Analysis with Bottleneck Operations Hercules 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 of 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 $10 per process hour. The fixed cost is $505,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 5,000 5,000 5,000 Total process hours per unit 14 12 9 Furnace hours per unit 4 3 5 Unit selling price $274 $233 $245 Direct materials cost per unit $110 $107 $95 The furnace operation is part of the total process for each of these three products. Thus, for example, 4 of…