Store−It produces plastic storage bins for household storage needs.The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high thatStore−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period.Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period. Sales prices and variable costs are as follows: regularLargeSales price per unit8.9010.10Variable costs per unit3.204.00 Requirement 1. Which product shouldStore−Itemphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour.Requirements: 1.Which product shouldStore−Itemphasize? Why?2.To maximize profits, how many of each size bin shouldStore−Itproduce?3.Given this product mix, what will the company's operating income be? Store-ItProduct Mix Analysis RegularLargeSales price per unit Variable cost per unit Contribution margin per unit Units per machine hour Contribution margin per machine hour

Contribution margin is the excess of sales over variable cost. It is the portion of sales after…

Answered: Store−It produces plastic storage bins…

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 16E

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Store−It produces plastic storage bins for household storage needs.

The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high that

Store−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period.

Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period.

Sales prices and variable costs are as follows:

	regular	Large
Sales price per unit	8.90	10.10
Variable costs per unit	3.20	4.00

Requirement 1. Which product should

Store−It

emphasize? Why?

Complete the product mix analysis to determine the contribution margin per machine hour.

Requirements:

1.	Which product should Store−It emphasize? Why?
2.	To maximize profits, how many of each size bin should Store−It produce?
3.	Given this product mix, what will the company's operating income be?

Store-It
Product Mix Analysis
	Regular	Large
Sales price per unit
Variable cost per unit
Contribution margin per unit
Units per machine hour
Contribution margin per machine hour

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