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Chapter 24 #11 Product Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products

Chapter 24 #11

  1. Product Decisions Under Bottlenecked Operations

    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 that 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 $227,000 for the company as a whole. In addition, the following information is available about the three products:

    Large Medium Small
    Unit selling price $103 $198 $448
    Unit variable cost 81 162 394
    Unit contribution margin $ 22 $ 36 $ 54
    Autoclave hours per unit 2 6 4
    Total process hours per unit 4 12 12
    Budgeted units of production 4,500 4,500 4,500

    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 $ $ $ $
    Variable costs
    Contribution margin $ $ $ $
    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
    Contribution margin $ $ $
    Autoclave hours per unit
    Unit contribution margin per production bottleneck hour $ $ $

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