StoreIt produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product is so high that the company can sell as many of each size as it can produce. The same machinery is used to produce both sizes. The machinery is available for only 2,800 hours per period. The company can produce 9 Large bins every hour compared to 15 Regular bins in the same amount of time. Fixed expenses amount to $120,000 per period. Sales prices and variable costs are as follows

1. Which product should Store minus ItStoreIt emphasize? Why?

2. To maximize profits, how many of each size bin should the company produce?

3. Given this product mix, what will the company's operating income be?

Which product should Store minus It StoreIt emphasize? Why?

Complete the product mix analysis to determine which product

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Product Mix Analysis
	Regular		Large
Sales price per unit
Less: Variable cost per unit
Contribution margin per unit
Units per machine hour	x		x
Contribution margin per machine hour

Decision:

Store minus ItStoreIt

should emphasize the production of

because the

contribution margin per machine hour

sales price per unit

is higher.

2. To maximize profits, how many of each size bin should the company produce? (If there are zero machine hours allocated to a bin size, enter 0 in the input box.)

Store-It should spend		machine hours making Regular size bins and		machine hours making
Large size bins.

3. Given the product mix determined in the previous step, calculate

Store minus ItStoreIt's

operating income for the period.

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Number of bins per period
Contribution margin per bin	x
Total contribution margin
Less: Fixed expenses
Operating income