The Role of Accounting Data: Management of TutTut Jewelry Corporation has been reviewing its profitability and attempting to improve performance through better planning. The company manufactures three products in its jewelry line: necklaces, bracelets, and rings. Selected data on these items are:

The machining time is limited to 120 hours per month. Demand for each product far exceeds the company's ability to meet the demand. There are no other relevant production constraints.

At the present time, management produces equal quantities of each product. The production vice president has urged the company to concentrate on necklace produc- tion because that has the greatest margin. No bracelets or rings would be produced if this recommendation were followed.

Required:

a. If fixed costs are $5,000 per month, what profit will be obtained by following the production vice president's recommendation? ]

b. What is the maximum profit obtainable and what product or product combination must be sold to obtain that maximum?

Transcribed Image Text:

Bracelets Rings $60 $40 25 20 .5 hour .25 hour .30 hour Selling price Contribution margin Machining time required Necklaces $80 35 35