could be produced using existing factory, selling, and administrative capacity.
ID: 2555956 • Letter: C
Question
could be produced using existing factory, selling, and administrative capacity. a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. b. Based on the differential analysis in part (a), should the proposal be accepted? PR 24-6A Product pricing and profit analsis with bottleneck operations OBJ. 3 Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each much as it can produce of all three. The furnace operation is a bottleneck in the process of these products (grades) has high demand in the market, and Hercules is able to sell as d is running at 100% of capacity. Hercules wants to improve steel operation profitability. an The variable conversion cost is $15 per process hour. The fixed cost is $200,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade 5,000 Regular Grade Good Grade 5,000 Budgeted units produced Total process hours per unit Furnace hours per unit Unit selling price Direct materials cost per unit 5,000 10 2.5 $250 $80 12 280 $90 3 $270 $84 5 Continued)Explanation / Answer
Particulars
Particulars
High Grade Good Grade Regular Grade Budgeted Units of Production 5000 5000 5000 Unit Selling Price (a) 280 270 250 Direct Material 90 84 80 Variable Processing Cost @15 per hour 180 165 150 Total Cost per unit (b) 270 249 230 Conribution Margin Per Unit © =(a)-(b) 10 21 20 Furnace Hours used (d) 4 3 2.5 Conribution margin per furnace hour ( e ) = ©/(d) 2.5 7 8Related Questions
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