10. Crane Company makes four products in a single facility. Data concerning thes

Question

10.       Crane Company makes four products in a single facility. Data concerning these products appear below:

                                                                                    Product

                                                                A                     B                     C                     D

Selling price per unit                           $35.30             $30.20             $20.80             $26.00

Variable manuf. cost per unit             $16.50            $15.80             $7.90             $8.50

Variable selling cost per unit                  $3.80            $1.60             $1.90             $3.30

Milling machine minutes per unit             3.30                1.70                 2.10                 2.50

Monthly demand in units                       4,000            1,000             3,000             1,000

The milling machines are potentially the constraint in the production facility. A total of 22,600 minutes are available per month on these machines. Which product makes the MOST profitable use of the milling machines?

           

Determine the order of production and the amount of each product to be produced given the time available and the demand for each product.

What is the total contribution margin that can be earned given the order of production & demand?

Explanation / Answer

  

  

Product B makes Most Profitable use of remaining minuts.

Order of Product Shour Be A C D B as per the volume of profit

  

A B C D 4000 Units 1000 units 3000 units 1000 units minuts required for given product 13200 1700 6300 2500 Minuts remaining for next 9400 3100 600 Variable Cost 66000 15800 23700 8500 Total 66000 15800 23700 8500 Variable Selling Cost 15200 1600 5700 3300 Total Cost 81200 17400 29400 11800 Selling Price 141200 30200 62400 26000 Profits 60000 12800 33000 14200 Remining Minuts 600 Additional Unit which may produced remaining minuts 182 353 286 240 Cost for Additional Units Variable Manu Cost 3000 5576 2257 2040 Variable selling cost 691 565 543 792 total Cost of additional Unit 3691 6141 2800 2832 Selling Price of Additional Product 6418 10659 5943 6240 profit from Additional Units 2727 4518 3143 3408 total Profit 62727 17318 36143 17608

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