Edge Company produces two models of its product with the same machine. The machine has a capacity of 142 hours per month. Thefollowing information is available.Selling price per unitVariable costs per unitContribution margin per unitMachine hours per unitMaximum unit sales per monthRequired:Contribution margin per unit1. Determine the contribution margin per machine hour for each modelProduct Contribution MarginContribution margin per machine hourStandard:$ 8025$ 55- 1 hour600 unitsHours dedicated to the production of each productUnits produced for most profitable sales mixContribution margin per unitTotal contribution marginDeluxe$ 11066$442 hours200 unitsStandardDeluxe2. How many units of each model should the company produce? How much total contribution margin does this mixproduce per month?StandardTotalDeluxe3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model shouldthe company produce? How much total contribution margin does this mix produce per month? 3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model shouldthe company produce? How much total contribution margin does this mix produce per month?StandardHours dedicated to the production of each productUnits produced for most profitable sales mixContribution margin per unitTotal contribution marginDeluxeTotal

Introduction: When there is constraint of machine hours for production of units, company tries to…

Edge Company produces two models of its product with the same machine. The machine has a capacity of 142 hours per month. The following information is available. Selling price per unit Variable costs per unit Contribution margin per unit Machine hours per unit Maximum unit sales per month Required: Contribution margin per unit Standard $80 25 $55 1. Determine the contribution margin per machine hour for each model Product Contribution Margin 1 hour. 600 units Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Deluxe $ 110 66 $44 2 hours 200 units Standard Deluxe Contribution margin per machine hour 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Total 3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month?

Edge Company produces two models of its product with the same machine. The machine has a capacity of 142 hours per month. The following information is available. Selling price per unit Variable costs per unit Contribution margin per unit Machine hours per unit Maximum unit sales per month Required: Contribution margin per unit Standard $80 25 $55 1. Determine the contribution margin per machine hour for each model Product Contribution Margin 1 hour. 600 units Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Deluxe $ 110 66 $44 2 hours 200 units Standard Deluxe Contribution margin per machine hour 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Total 3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum demand for each product of 4,000 units, how much will profits increase if 200 more hours of machine time can be obtained?
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum demand for each product of 4,000 units, how many of each product should be made?
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
Crystal Pools estimates overhead will utilize 250,000 machine hours and cost $750,000. It takes 2 machine hours per unit, direct material cost of $14 per unit, and direct labor of $20 per unit. What is the cost of each unit produced?
Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell with the theoretical capability to produce 450,000 fuel pumps per quarter. The conversion cost per quarter is 9,000,000. There are 150,000 production hours available within the cell per quarter. Required: 1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit produced). 2. Compute the ideal amount of conversion cost that will be assigned per subassembly. 3. Suppose the actual time required to produce a fuel pump is 40 minutes. Compute the amount of conversion cost actually assigned to each unit produced. What happens to product cost if the time to produce a unit is decreased to 25 minutes? How can a firm encourage managers to reduce cycle time? Finally, discuss how this approach to assigning conversion cost can improve delivery time. 4. Assuming the actual time to produce one fuel pump is 40 minutes, calculate MCE. How much non-value-added time is being used? How much is it costing per unit? 5. Cycle time, velocity, MCE, conversion cost per unit (theoretical conversion rate actual conversion time), and non-value-added costs are all measures of performance for the cell process. Discuss the incentives provided by these measures.
Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost data represents average cost per unit for 15,000 units of production. Using the cost data from Rose Company, answer the following questions: If 10,000 units are produced, what is the variable cost per unit? If 18,000 units are produced, what is the variable cost per unit? If 21,000 units are produced, what are the total variable costs? If 11,000 units are produced, what are the total variable costs? If 19,000 units are produced, what are the total manufacturing overhead costs incurred? If 23,000 units are produced, what are the total manufacturing overhead costs incurred? If 19,000 units are produced, what are the per unit manufacturing overhead costs incurred? If 25,000 units are produced, what are the per unit manufacturing overhead costs incurred?