Dropping a product line. Timepiece Products, a clock manufacturer , operates at

Question

Dropping a product line. Timepiece Products, a clock manufacturer , operates at capacity. Constrained by machine time, the company decides to drop the most unprofitable of its three product lines. The accounting department came up with the following data from last year’s operations:

Manual

Electric

Quartz

Machine Time per Unit……………

0.4 Hour

2.5 Hours

5.0 Hours

Selling Price per Unit……………….

$20

$30

$50

Less Variable Cost per Unit………

10

14

28

Contribution Margin………………..

$10

$16

$22

Which line should Timepiece Products drop? (Hint: Compute the contribution per machine hour because machine time is the constraint.)

Manual

Electric

Quartz

Machine Time per Unit……………

0.4 Hour

2.5 Hours

5.0 Hours

Selling Price per Unit……………….

$20

$30

$50

Less Variable Cost per Unit………

10

14

28

Contribution Margin………………..

$10

$16

$22

Explanation / Answer

ConcluSion ;

Quartz has minimum contribution per machine hr hence it should be dropped while its hrs should be utilized in production of Electric .

Manual electric quartz Contribution margin per unit. A 10 16 22 Machine time per unit B 0.4 hrs 2.4 hrs 5 hrs Contribution per machine hr A/B 25 38 4 4 4

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.