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Contributon margin per constraint Chavez Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand in the market, and Chavez Chemical is able to sell as much as it can produce of all three. The reaction operation is a bottleneck in the process and is running at 100% of capacity. Chavez Chemical wants to improve chemical operation profitability. The variable conversion cost is $20 per process hour. The fixed cost is $550,000. In addition, the cost analyst was able to determine the following information about the three products: The reaction operation is part of the total process for each of these three products. Thus, for example. 1.0 of the 6 hours required to process ethylene is associated with the reactor. Instructions Assume that management wishes to improve profitability by increasing prices on selected products. Al what price would ethylene and butane need to by- offered in order to produce the same relative profitability as ester?

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883
BuyFind

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883

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Chapter
Section
Chapter 12, Problem 12.5.3MBA
Textbook Problem

Contributon margin per constraint
Chavez Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand in the market, and Chavez Chemical is able to sell as much as it can produce of all three. The reaction operation is a bottleneck in the process and is running at 100% of capacity. Chavez Chemical wants to improve chemical operation profitability. The variable conversion cost is $20 per process hour. The fixed cost is $550,000. In addition, the cost analyst was able to determine the following information about the three products:

Chapter 12, Problem 12.5.3MBA, Contributon margin per constraint Chavez Chemical Company produces three products: ethylene, butane,
The reaction operation is part of the total process for each of these three products. Thus, for example. 1.0 of the 6 hours required to process ethylene is associated with the reactor.
Instructions
Assume that management wishes to improve profitability by increasing prices on selected products. Al what price would ethylene and butane need to by- offered in order to produce the same relative profitability as ester?

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Chapter 12 Solutions

Survey of Accounting (Accounting I)
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