Enterprise Instrumental Designs fabricates two product lines Sheet Metal and Scr
ID: 2445803 • Letter: E
Question
Enterprise Instrumental Designs fabricates two product lines Sheet Metal and Screws. The following information was gathered:
PRODUCTS
Sheet Metal
Screws
Selling price per unit
$36.00
$44.00
Variable cost per unit
26.00
36.00
Total fixed costs
$ 50,000
1. If Enterprise Instrumental Designs could produce and sell either 3,000 units of Sheet Metal or 2,000 units of Screws at full capacity. What options below should it produce and sell?
A. 2,000 units of Screws and none of Sheet Metal.
B. 1,000 units of Screws and 1,500 units of Sheet Metal.
C. 3,000 units of Sheet Metal and none of Screws.
D. either Sheet Metal or Screws, there is no difference.
2. Based on the assumption that Enterprise Instrumental Designs could produce and sell any mix of products such as Sheet Metal and Screws at full capacity. If the product category Sheet Metal takes twice as long to manufacture as product category Screws and only 200,000 hours of plant capacity are available. What is the best available options for Enterprise Instrumental Designs to produce?
A. Only Sheet Metal
B. OnlyScrews.
C. Either Sheet Metal or Screws, there is no difference
D. An equal number of Sheet Metal and Screws.
PRODUCTS
Sheet Metal
Screws
Selling price per unit
$36.00
$44.00
Variable cost per unit
26.00
36.00
Total fixed costs
$ 50,000
Explanation / Answer
1.CONTRIBUTION ON SELLING OF SHEET METAL $(36-26)= $ 10
CONTRIBUTION ON SELLING OF SCREWS $(44-36)= $ 8
SO OPTION C IS THE BEST WITH CONTRIBUTION $ 3000*10= $ 30000
2. If the product category Sheet Metal takes twice as long to manufacture as product category Screws and only 200,000 hours of plant capacity are available
ANSWER IS B. ONLY SCREW
CONTRIBUTION ON SELLING OF SHEET METAL $(36-26)= $ 10 AND EFFECTIVELY TAKE TWICE THE TIME THEN EFFECTIVE CONTRIBUTION IS $ 10/2 = $ 5
CONTRIBUTION ON SELLING OF SCREWS $(44-36)= $ 8
SO THE EFFECTIVE CONTRIBUTION FOR OF SELLING SCREW IS MORE BY $ 3 (8-3)
hours of plant capacity IS THE LIMITTING FACTOR HERE
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