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	$	$	$