1.

Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $263,000 for the company as a whole. In addition, the following information is available about the three products:

	Large		Medium		Small
Unit selling price	$235		$110		$573
Unit variable cost	185		90		504
Unit contribution margin	$ 50		$ 20		$ 69
Autoclave hours per unit	4		2		6
Total process hours per unit	12		6		12
Budgeted units of production	4,200		4,200		4,200

a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

	Large	Medium	Small	Total
Units produced
Revenues	$	$	$	$
Less: Variable costs
Contribution margin	$	$	$	$
Less: Fixed costs
Income from operations				$

b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent.

	Large	Medium	Small
Unit contribution margin	$	$	$
Autoclave hours per unit
Unit contribution margin per production bottleneck hour	$	$	$

2.

Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,800. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,200 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost).

a. What price will Basic establish for the QuikCar for the upcoming model year? $________

b. Since the estimated manufacturing cost exceeds the target cost, Basic must reduce its total costs to maintain competitive pricing within its profit objectives.