Cullumbar Innovat ons,Inc. praduces exarcisn and fitress gear. Two af its newer
ID: 2582040 • Letter: C
Question
Cullumbar Innovat ons,Inc. praduces exarcisn and fitress gear. Two af its newer praducts require a finishing process that can anly be completed on machines that were recenty purchased for this puurpose. The machines hae a maximum capacity af 6,000 machine hours, and no other products thar the company makes use these machines. Sarah Jacob, the company's operations manager, is preparing the production schedule for the coming month and can't seem to find enough machine time to produoe enough units to meet the customer demand that the marketing department has inc uced in the sales budget. Michael 5toner, the company's controller, has gathered the following information about the two products: Dumbbell Rack Weight Bench Scing price per unit Direct materials Direct labor Veriable verhead Profit per unit Unit sales demand0DG70O0 Machine hours per unlt 0.5Explanation / Answer
Ans.
Dumbbell Rack Weight Bench
Profit per unit $19 $22
Add: Fixed Cost $5 $10
Contribution $24 $32
Per unit machine hour .5 .8
Contribution per hour $48 $40
Allocation of Machine Hours
Dumbbel rack = 4000X.50 = 2000
Weight Bench = 5000X.80 =4000
Contribution
Dumbbel Rack = 2000X48 = 96000
Weight bench = 4000X40 = 160000
Total contribution = 256000
Allocation of Hours after increase price
Dumbbel rack Weight bench
SP $57 $70
Variable cost(same) $27 $30
Contribution $30 $40
Machine per unit .50 .80
Contri. per machine hr $60 $50
Rank 1 2
Demand dumbbel rack is 2280
Weight rack is 7000
Allocaiton of Machine hours
Dumbbel rack = 2280X.50 = 1140
Weight bench is = 6075X.80= 4860
Total 6000
Contribution as per revised demand
Dumbbel rack = 1140X60 = 68400
Weight Bench = 4860X50 = 243000
Total contribution = $311400
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