Wiley Wrench Company manufactures three types of wrench: large,medium, and small

Question

Wiley Wrench Company manufactures three types of wrench: large,medium, and small. All three products have high demand. Thus, WileyWrench is able to sell all the wrench that it can make. Theproduction process includes an autoclave operation, which is apressurized heat treatment. The autoclave is a productionbottleneck. Total fixed costs are $550,000. In addition, thefollowing information is available about the three products:

                                            Large            Medium           Small
Unit sellingprice                            $240                 $180                   $120
Unit variableprice                          $126                 $ 80                   $ 68
Unit contributionmargin                 $114                 $100                   $ 52

Autoclave hours perunit                    6                      10                      4
Total process hours perunit               20                    16                      12
Budgeted units ofproduction              2,500                2,500                 2,500

a. Determine the contribution margin by wrench type and the totalcompany income from operations for the budgeted units ofproduction. ?

Explanation / Answer

Total Large Medium Small Sales 1,350,000 600,000 450,000 300,000 Variable Expense 685,000 315,000 200,000 170,000 Contribution Margin 665,000 285,000 250,000 130,000

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