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5) Product pricing and profit analysis with bottleneck operations Hercules Steel Company produces three grades of steelt high, good, and regular grade. Each of these
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Product pricing and profit analysis with bottleneck operations Hercules Steel Company produces three grades of steelt high, good, and regular grade. Each of these products (grades) has high demand in the marketi and Hercules is able to sell as much as it can produce of all three. The furnace operation is a botteneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $15 per process hour. The fixed cost is $200,000, In addition, the cost analyst was able to determine the following information about the three productsi Ine rumace operation is part of the total process for each of these three products. Thus, for example, 4 of the 12 hours required to process High Grade steel are associated with the furnace. Required: 1. Determine the unit contribution margin for each product, 2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottlenteck. Round your answers to two decimal places Step by Step Solution
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