Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $296,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $324 $286 $158 Unit variable cost 255 234 139 Unit contribution margin $ 69 $ 52 $ 19 Autoclave hours per unit 6 4 2 Total process hours per unit 18 8 6 Budgeted units of production 4,700 4,700 4,700 a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production. Large Medium Small Total Units produced Revenues Less: Variable costs Contribution margin Less: Fixed costs Income from operations b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent. Large Medium Small Unit contribution margin Autoclave hours per unit Unit contribution margin per production bottleneck hour

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 21E

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Product Decisions Under Bottlenecked Operations

Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $296,000 for the company as a whole. In addition, the following information is available about the three products:

	Large	Medium	Small
Unit selling price	$324		$286	$158
Unit variable cost	255		234	139
Unit contribution margin	$ 69		$ 52	$ 19
Autoclave hours per unit	6		4	2
Total process hours per unit	18		8	6
Budgeted units of production	4,700		4,700	4,700

a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

	Large	Medium	Small	Total
Units produced
Revenues
Less: Variable costs
Contribution margin
Less: Fixed costs
Income from operations

b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent.

	Large	Medium	Small
Unit contribution margin
Autoclave hours per unit
Unit contribution margin per production bottleneck hour

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