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began with a puzzle for your class to solve: We bottle three primary products in our plant: ketchup, mustard, and relish. Our operations manager
began with a puzzle for your class to solve:
We bottle three primary products in our plant: ketchup, mustard, and relish. Our operations manager has always put priority on our
highest contribution margin product. That makes sense, right? But a few months ago, we went 'old school' for our ketchup and started
bottling it in classic tall, slender glass bottles. Our customers actually enjoy having to give the bottle a whack to get the product
flowing. Since that switch, though, our production department can't seem to meet the budget."
The plant manager then showed the class the following information.
The plant manager then said: "The puzzle: Im not sure if we are maximizing the profitability of our bottling capacity anymore. What do
you think?"
b
Your answer is correct.
Assume that after the switch to glass bottles, the following cost relationship exists for all three products: variable costs are of
selling price. Given this information, what must be the current contribution margin per unit for each of the three products?
Further, in what order should the company now rank its products in terms of profitability if the bottling activity is its primary
constraint? Round answers to decimal places, eg
c
Your answer is partially correct
c Given your new rankings in part b calculate how many bottles units of each product the company would need to make to
maximize profitability, considering the constraint, while not exceeding demand. The bottling activity operates hours a day,
days a month. If no unit of an item is to be produced enter O Do not leave any field blank.
Units produced within this
time
c Then, calculate the company's monthly contribution margin under this scenario.
Monthly contribution margin $
c Calculate the monthly contribution margin it would have been under the previous production priority.
Monthly contribution margin $
c Explain the difference in profit between these two scenarios, if there is any.
Profit is $
under the new rankings.
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