Question
A company manufactures 2 core trade items, A and B. Both products need manufacturing time in 3 stages which is shown below: Stage Capacity of
A company manufactures 2 core trade items, A and B. Both products need manufacturing time in 3 stages which is shown below:
| Stage | Capacity of stage | Item A | Item B |
|---|---|---|---|
| Cutting | 100 | 8 | 1 |
| Coating | 50 | 1 | 1 |
| Assembling | 100 | 1 | 4 |
| TOTAL HOURS PER ITEM: | 10 | 6 |
The chief plant officer (CPO) says that product A has a profit contribution (Price sold minus Variable Cost) of 20000 USD and product B of 16000 USD. The production capability is defined by the capacity of each stage. Questions: 1. If somebody could produce only product A, which could be the official contribution in the profits? 2. If the added time was used for production of product B, which could the total profit be? 3. Could you suggest to the CPO another production mix in order to achieve higher total profit and if yes which would be the percentage for each stage?
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Cost Accounting A Managerial Emphasis
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
14th Edition
978-0132960649, 132960648, 132109174, 978-0132109178
