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Problem 4.43 Blossom Co. manufactures three different models of colour plasma screens: PS1, PS2, and PS3. Data on the three models is presented below: PS1
Problem 4.43 Blossom Co. manufactures three different models of colour plasma screens: PS1, PS2, and PS3. Data on the three models is presented below: PS1 PS2 PS3 Selling price $370 $590 $440 Unit variable cost $238 $422 $288 Annual production units 4,430 3,400 4,200 Machine-hours per unit 6 12 8 Avoidable fixed costs, if product line is eliminated $46,700 $41,000 $54,500 Blossom's production capacity is 91,140 machine-hours per year. Chy Co. has offered to purchase 4,800 units of a simpler version of PS3 for $428. Blossom estimates that this version of the PS3 would result in variable costs of $285 per unit to manufacture and 7 machine hours per unit, but an additional fixed cost of $59,000 for a new assembly machine. The order has to be either taken in full or rejected totally. If Blossom takes the special order, it will not produce and sell PS3 to compete with Chiyo. Compute the profitability Index for each model and rank the order of priority for the models to be produced. (Round answers to 2 decimal places, e.g. 15.25.) Pofitability index PS1 $ PS2 $ P53
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