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Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Direct fixed expenses consist of depreciation
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that, each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Assume that 20% of the Alanson customers choose to buy from Petoskey because it offers a full range of products, including Conway. If Conway were no longer available from Petoskey, these customers would go elsewhere to purchase Alanson. Required: Conceptual Connection: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". $x Should Petoskey keep or drop Conway? Determining the Optimal Product Mix with One Constrained Resource and a Sales Constraint Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 30 minutes of machine time. Assume that a maximum of 49,970 units of each sweatshirt can be sold. Required: If required, round your answers to the nearest whole number. 1. What is the contribution margin per hour of machine time for each type of sweatshirt? 2. What is the optimal mix of sweatshirt? 3. What is the total contribution margin earned for the optimal mix? x
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