2. Backyard Inc. manufactures two types of outdoor Christmas decorations: Reinde

Question

2. Backyard Inc. manufactures two types of outdoor Christmas decorations: Reindeer and Snowman. The information for each product follows Monthly demand of products in units.. Selling price per unit. Direct materials per Direct labor per unit Variable manufacturing overhead per unit.. Fixed manufacturing overhead per unit $14 Molding hours per unit 800 $160 $44 $56 $16 600 $200 $56 $57 $17 $15 0.8 0.4 The molding machine is the constraint in the production process. are available this month. A total of 400 molding hours a. What is the contribution margir for each product type? Ans: $ for Reindeer for Snowman b. To maximize net operating income, the company should produce units of Reindeer requiringmolding hours Ans: molding hours units of Snowman requiring

Explanation / Answer

Statement of contribution per unit

Particulars Re indeer. Snowman

Selling price 160. 200

Less

DM. 44. 56

DL. 56. 57

V OH. 16. 17

Contribution per unit 44. 70

Moulding hours per unit 0.4. 0.8

Contribution per moulding hour 110. 87.5

Rank. 1. 2

Statement of production showing to get max profit

Product Demand. Production. Utilised hrs Remaing hrs

Re indeer. 800. 800. 320. (800*0.4). 80

Snowman 600 100(80/0.8). 80. Nil

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