Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules
Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacty, Hercules wants to prove steel operation profitability. The variable conversion cost is $10 per process how. The fixed cost is $509,000. In addition, the cost analyst was able to determine the following information about the three products High Grade Good Grade Regular Grade Budgeted units produced 6,000 6,000 6,000 Total process hours per unit 10 12 9 Furnace hours per unit 5 Unit selling price $332 5200 255 Direct materials cost per unit $100 199 The furnace operation is part of the total process for each of these three products. Thus, for comple, 5 of the 14 hours rejwed to process High Grade ressociated with the fumace 4 1 1. Determine the unit contribution margin for each product. It required, round your answers to two decimal places Contribution Margin Per Unit High Orade Good Grade Regular Grade 2. Provide an analysis to determine the relative product brott, ung that the whole Contribution Margin Per Fumace Hour 2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottleneck. Contribution Margin Per Furnace Hour High Grade Good Grade Regular Grade
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started