a) Explanation Contribution margin: Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting variable cost from sales. Calculate the contribution margin per unit for each product of Company HS. High Grade Good Grade Regular Grade Selling Price $280.00 $270.00 $250.00 Variable conversion cost per unit (1) $180.00 (2) $165.00 (3) $150.00 Direct material cost per unit $90.00 $84.00 $80.00 $270.00 $249.00 $230.00 Contribution margin per unit $10.00 $21.00 $20.00 Hence, the contribution margin for high grade steel is $10.00 per unit, for good grade steel is $21.00 per unit, and for regular grade steel is $20.00 per unit. Working Note: Calculate the variable conversion cost per unit of high grade steel... b) To determine The relative product profitability per unit for each product of Company HS.

27th Edition

ISBN: 9781337514095

Author: Carl Warren, James M. Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Question

Chapter 25, Problem 25.6APR

To determine

Production Bottleneck: Production Bottleneck is a situation of constraint in the manufacturing company, where the demand for goods is higher, than the production capacity of the company. In this situation the production or contribution per bottleneck hour is calculated to determine the value of a product.

To Determine: The contribution margin per unit for each product of Company HS.

To determine

The relative product profitability per unit for each product of Company HS.

Expert Solution & Answer

Chapter 25 Solutions

Accounting, Chapters 14-26

Ch. 25 - Explain the meaning of (a) differential revenue,...Ch. 25 - A company could sell a building for 250,000 or...Ch. 25 - A chemical company has commodity-grade and...Ch. 25 - A company accepts incremental business at a...Ch. 25 - A company fabricates a component at a cost of...Ch. 25 - Prob. 6DQ Ch. 25 - In the long run, the normal selling price must be...Ch. 25 - Although the cost-plus approach to product pricing...Ch. 25 - How does the target cost concept differ from...Ch. 25 - Prob. 10DQ

Ch. 25 - Under what conditions might a company use...Ch. 25 - Lease or sell Duncan Company owns a machine with a...Ch. 25 - Lease or sell Timberlake Company owns equipment...Ch. 25 - Prob. 25.2APE Ch. 25 - Discontinue a segment Product B has revenue of...Ch. 25 - Make or buy A restaurant bakes its own bread for a...Ch. 25 - Make or buy A company manufactures various sized...Ch. 25 - Replace equipment A machine with a book value of...Ch. 25 - Replace equipment A machine with a book value of...Ch. 25 - Prob. 25.5APE Ch. 25 - Process or sell Product D is produced for 24 per...Ch. 25 - Accept business at special price Product AA is...Ch. 25 - Prob. 25.6BPE Ch. 25 - Product cost markup percentage Light force Inc....Ch. 25 - Product cost markup percentage Green Thumb Garden...Ch. 25 - Bottleneck profit Product A has a unit...Ch. 25 - Prob. 25.8BPE Ch. 25 - Activity-based costing Mainline Marine Company has...Ch. 25 - Activity-based costing Casual Cuts Inc. has total...Ch. 25 - Differential analysis for a lease-or-sell decision...Ch. 25 - Prob. 25.2EX Ch. 25 - Prob. 25.3EX Ch. 25 - Differential analysis for a discontinued product...Ch. 25 - Segment analysis for a service company Charles...Ch. 25 - Decision to discontinue a product On the basis of...Ch. 25 - Make or buy decision Diamond Computer Company has...Ch. 25 - Make-or-buy decision for a service company The...Ch. 25 - Machine replacement decision A company is...Ch. 25 - Differential analysis for machine replacement Kim...Ch. 25 - Sell or process further Big Fork Lumber Company...Ch. 25 - Prob. 25.12EX Ch. 25 - Decision on accepting additional business...Ch. 25 - Accepting business at a special price Portable...Ch. 25 - Prob. 25.15EX Ch. 25 - Accepting business at a special price for a...Ch. 25 - Product cost concept of product pricing La Femme...Ch. 25 - Product cost concept of product costing Smart...Ch. 25 - Target costing Toyota Motor Corporation uses...Ch. 25 - Target costing Instant Image Inc. manufactures...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Activity-based costing CardioTrainer Equipment...Ch. 25 - Activity-based costing Zeus Industries...Ch. 25 - Activity rates and product costs using...Ch. 25 - Total cost concept of product pricing Based on the...Ch. 25 - Variable cost concept of product pricing Based on...Ch. 25 - Differential analysis involving opportunity costs...Ch. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Prob. 25.4APR Ch. 25 - Prob. 25.5APR Ch. 25 - Prob. 25.6APR Ch. 25 - Activity-based costing Pure Cane Sugar Company...Ch. 25 - Prob. 25.1BPR Ch. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Differential analysis for further processing The...Ch. 25 - Prob. 25.5BPR Ch. 25 - Product pricing and profit analysis with...Ch. 25 - Activity-based costing Southeastern Paper Company...Ch. 25 - Ethics in Action Aaron McKinney is a cost...Ch. 25 - Communication The following conversation took...Ch. 25 - Decision on accepting additional business A...Ch. 25 - Accept business at a special price for a service...Ch. 25 - Identifying product cost distortion Peachtree...

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