Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Туре S Туре 10 Туре 20 Revenues $43,000 $49,000 $56,500 Variable cost $(34,000) $(28,000) $(26,500) Fixed cost (8,000) (8,000) (8,000) Total cost $(42,000) $(36,000) $(34,500) Operating income $1,000 $13,000 $22,000 + 5,000 $ 4.40 + 5,000 + 5,000 Number of units Operating income per unit $0.20 $ 2.60 Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: Type 5: 6 hours Туре 10: 6 hours Туре 20: 12 hours The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. Type 5 Type 10 Unit contribution margin per furnace hour Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?

Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Туре S Туре 10 Туре 20 Revenues $43,000 $49,000 $56,500 Variable cost $(34,000) $(28,000) $(26,500) Fixed cost (8,000) (8,000) (8,000) Total cost $(42,000) $(36,000) $(34,500) Operating income $1,000 $13,000 $22,000 + 5,000 $ 4.40 + 5,000 + 5,000 Number of units Operating income per unit $0.20 $ 2.60 Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: Type 5: 6 hours Туре 10: 6 hours Туре 20: 12 hours The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places. Type 5 Type 10 Unit contribution margin per furnace hour Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?

Name: Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as…
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Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter25: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 20E: Product decisions under bottlenecked operations Mill Metals Inc. has three grades of metal product,...

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