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Product Pricing and Profit Analysis with Bottleneck Operations Wilmington Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand
Product Pricing and Profit Analysis with Bottleneck Operations
Wilmington Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand in the market, and Wilmington Chemical is able to sell as much as it can produce of all three. The reaction operation is a bottleneck in the process and is running at of capacity. Wilmington wants to improve chemical operation profitability. The variable conversion cost is $ per process hour. The fixed cost is $ In addition, the cost analyst was able to determine the following information about the three products:
Line Item Description Ethylene Butane Ester
Budgeted units produced
Total process hours per unit
Reactor hours per unit
Unit selling price $ $ $
Direct materials cost per unit $ $ $
The reaction operation is part of the total process for each of these three products. Thus, for example, of the hours required to process ethylene is associated with the reactor.
Required:
Determine the unit contribution margin for each product.
Product Contribution Margin
Per Unit
Ethylene $fill in the blank
Butane $fill in the blank
Ester $fill in the blank
Provide an analysis to determine the relative product profitabilities, assuming that the reactor is a bottleneck.
Product Contribution Margin
Per Reactor Hour
Ethylene $fill in the blank
Butane $fill in the blank
Ester $fill in the blank
Check My Work more Check My Work uses remaining.
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