Question
Requirement 1. Which product should Containers Plus emphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour. Containers Plus Product
Requirement 1. Which product should
Containers Plus
emphasize? Why?
Complete the product mix analysis to determine the contribution margin per machine hour.
Containers Plus | ||||
Product Mix Analysis | ||||
| Regular | Large | ||
Sales price per unit |
| $9.00 |
| $10.90 |
Variable cost per unit |
| 3.10 |
| 4.70 |
Contribution margin per unit |
| 5.90 |
| 6.20 |
Units per machine hour | 15 | 11 | ||
Contribution margin per machine hour |
| $88.50 |
| $68.20 |
Which product should
Containers Plus
emphasize? Why?
Containers Plus
should emphasize the production of
regular bins
because this product has the higher
contribution margin per machine hour.
Requirement 2. To maximize profits, how many of each size bin should
Containers Plus
produce? (Enter a "0" for any zero amounts.)
Containers Plus should spend | 3,300 | machine hours making | 49,500 | regular size bins, and | 0 | |
machine hours making | 0 | large size bins. |
Requirement 3. Given this product mix, what will the company's operating income be?
Number of regular size bins per period |
| 3300 |
Contribution margin per regular size bin |
| |
Total contribution margin |
|
|
Fixed costs |
|
|
Operating income |
|
|
The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high that
Containers Plus can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for
3,300hours per period.Containers Plus can produce 11 large bins every hour, whereas it can produce15
regular bins in the same amount of time. Fixed costs amount to $125,000 per period.
| Regular | Large |
---|---|---|
Sales price per unit | $9.00 | $10.90 |
Variable costs per unit | 3.10 | 4.70 |
1. | Which product should Containers Plus emphasize? Why? |
2. | To maximize profits, how many of each size bin should Containers Plus produce? |
3. | this product mix, what will the company's operating income be? |
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