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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Contribution margin per constraint
Nygard Glass Company manufactures three types of safety' plate glass: mirror, laminated, and regular. All three products have high demand. Thus. Nygard Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production constraint. Total fixed costs for the period are expected to be $90,000. In addition, the following information is available for the three products:


a.Determine the contribution margin by glass type and the total company operating income for the budgeted units of production.
b.Prepare an analysis showing which product is the most profitable per constraint hour.

To determine

(a)

Concept Introduction:

Contribution margin is the difference between the sales and variable cost. In other words, it is computed by subtracting the sales by variable cost.

Production constraints: There are a number of limiting factor on the quantity and nature of the output which was completed in the given time by the producer.

To find out:

The contribution margin by glass type and total company operating income for the budgeted units of production.

Explanation

As given in the question, the company produces three products of safety plate namely Mirror, Laminated and Regular. There is very high demand in market for the three products.

Computation of contribution margin for individual of product and overall company operation for the budgeted units:

    ParticularsMirrorsLaminatedRegularTotal
    Total Production in Units  10,000  10,000  10,000
    Selling price per unit (a)  $90  $75  $60
    Variable cost per unit (b)  $72  $65
To determine

(b)

Concept Introduction:

Contribution margin is the difference between the sales and variable cost. In other words, it is computed by subtracting the sales by variable cost.

Production constraints: There are a number of limiting factor on the quantity and nature of the output which was completed in the given time by the producer.

To find:

The more beneficial product for the company.

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