Please help me Because of your love of condiments (especially on a hot dog!), you have been following the happenings at the local bottling plant. Lastweek, a newspaper article mentioned slowdowns there due to operational issues, which was intriguing since it's a topic you'restudying at school right now. Lucky for you, one of the plant managers was already planning a visit to your classroom. As he spoke, hebegan with a puzzle for your class to solve:"We bottle three primary products in our plant: ketchup, mustard, and relish. Our operations manager has always put priority on ourhighest contribution margin product. That makes sense, right? But a few months ago, we went 'old school' for our ketchup and startedbottling it in classic tall, slender glass bottles. Our customers actually enjoy having to give the bottle a whack to get the productflowing. Since that switch, though, our production department can't seem to meet the budget."The plant manager then showed the class the following information.Ketchup MustardRelishCurrent priority based on CM per unit# 1# 3# 2Bottling time (hours per unit)0.010.0050.02Variable cost per unit$1.05$0.75$1.05Monthly demand (units)42,00025,000 11,000The plant manager then said: "The puzzle: I'm not sure if we are maximizing the profitability of our bottling capacity anymore. What doyou think?"(b)Your answer is correct.Assume that after the switch to glass bottles, the following cost relationship exists for all three products: variable costs are 25% ofselling price. Given this information, what must be the current contribution margin per unit for each of the three products?Further, in what order should the company now rank its products in terms of profitability if the bottling activity is its primaryconstraint? (Round answers to 2 decimal places, eg. 15.25.)KetchupMustardRelishContribution315450157.5margin/bottling hourNew priority rank2(c)(c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make tomaximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.)KetchupMustardRelishUnits produced within this time(c2) Then, calculate the company's monthly contribution margin under this scenario.Monthly contribution margin $(c3) Calculate the monthly contribution margin it would have been under the previous production priority.Monthly contribution margin$4(c4) Explain the difference in profit between these two scenarios, if there is any.Profit is $under the new rankings.

This some is based on the bottleneck activity concept. In this first we will need to find out the…

(c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $ (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.

(c) (c1) Given your new rankings in part (b), calculate how many bottles (units) of each product the company would need to make to maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates 18hours a day, 28 days a month. (If no unit of an item is to be produced enter 0. Do not leave any field blank.) Ketchup Mustard Relish Units produced within this time (c2) Then, calculate the company's monthly contribution margin under this scenario. Monthly contribution margin $ (c3) Calculate the monthly contribution margin it would have been under the previous production priority. Monthly contribution margin $ (c4) Explain the difference in profit between these two scenarios, if there is any. Profit is $ under the new rankings.

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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