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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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