Product Decisions Under Bottlenecked Operations

Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows:

	Type 5		Type 10		Type 20
Revenues	$43,000		$49,000		$56,500
Variable cost	$(34,000)		$(28,000)		$(26,500)
Fixed cost	(8,000)		(8,000)		(8,000)
Total cost	$(42,000)		$(36,000)		$(34,500)
Operating income	$ 1,000		$13,000		$22,000
Number of units	5,000		5,000		5,000
Operating income per unit	$ 0.20		$ 2.60		$ 4.40

Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows:

Type 5:	6 hours
Type 10:	6 hours
Type 20:	12 hours

The Marketing Department is considering a new marketing and sales campaign.

Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.

	Type 5		Type 10		Type 20
Unit contribution margin per furnace hour	$fill in the blank 1		$fill in the blank 2		$fill in the blank 3

Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?

Type 5Type 10Type 20