only part needed is the machine hours for regular sized bins StoreAll produces p
ID: 3197028 • Letter: O
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only part needed is the machine hours for regular sized bins
StoreAll produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product is so high that the company can sell as many of each size as it can produce. The same machinery is used to produce both sizes. The machinery is available for only 3,500 hours per period. The company can produce 12 Large bins every hour compared to 17 Reglar bins in the same amount of time. Fixed expenses amount to $115,000 per period. Sales prices and variable costs are as follows: EEB (Click the icon to view the costs.) 1. Which product should StoreAll emphasize? Why? 2. To maximize profits, how many of each size bin should the company produce? 3. Given this product mix, what will the company's operating income be? Data Table Regular Large Regular Large Sales price per unit Less: Variable cost per unit Contribution margin per unit Units per machine hour Contribution margin per machine hour Decision: StoreAll should emphasize the production of Regular bins because the contribution margin per machine hour is higher 2. To maximize profits, how many of each size bin should the company produce? (If there are zero machine hours allocated to a bin size, enter 0 in the input box.) StoreAll should spend $ 8.10 10.50 4.00 6.50 12 $ 78.20 $ 78.00 3.50 4.60 17 Sales price per unit .. . . . . . $ 8.10 S 10.50 Variable cost per unit $ 3.50 4.00 PrintDone 59500 machine hours making Regular size bins and machine hours makingExplanation / Answer
SInce, the contribution margin per machine hour is higher for regular bins, StoreAll would be better off by producing regular bins as they would be able to achieve the break-even point earlier (BE point = Fixed cost / Contribution margin per unit) and make more profits.
Given that the machinery is available for only 3500 hours per period, the machine hours for regular sized bins should be 3500 and 0 for large bins. For 3500 hours of availability, regular bins produced would be 3500*17 = 59500
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