THE PENNSYLVANIA ENGINE COMPANY MANUFACTURES THE IDENTICAL SMALL ENGINE AT TWO PENNSYLVANIA PLANTS, AN OLDER PLANT IN POTTSVILLE AND A NEW PLANT IN HARRISBURG. INFORMATION FOR EACH OF THE PLANTS FOR 2015 IS SUMMARIZED BELOW;

	POTTSVILLE	HARRISBURG
Selling price per engine	$155.00	$155.00
Varible manufacturing cost per engine	91.00	75.00
Fixed manufacturing cost per engine	15.00	30.00
Variable marketing & distribution cost per engine	16.00	15.00
Fixed marketing & distribution cost per engine	13.00	16.00
production per day	320 engines	400 engines
normal annual capacity	240 days	240 days
Maximum annual capacity	310 days	310 days

The above fixed and variable costs per engine are calculated based upon each plant operating at the normal annual capacity. Annual fixed costs at each plant remain constant as activity levels change and can only be eliminated through complete shutdown of the plant. When the Pottsville plant operates above normal capacity, overtime increases the variable manufacturing cost by $5.00, and the variable marketing & distribution cost by $2.00 for each additional engine produced. When the Harrisburg plant operates above normal annual capacity, overtime increases the variable manufacturing cost by $7.00, and the variable marketing &distribution cost by $4.00 for each additional engine produced.

A. Calculate the contribution margin per engine at normal capacity and on overtime for the Harrisburg and Potsville plants, individually

B. Calculate total annual fixed costs for the Pottsville and Harrisburg plants, Indivdually: Then calculate the annual breakeven point in engines for each plant.

C. The Pennsylvania Engine Company is currently under contract to produce and sell 155,000 engines in 2015. How should the production be allocated between the pottsville and Harrisburg plant to maximize the operating income of the Pennsylvania Engine Company? Calculate Pennsylvania Engine Companys total operating income for 2015 under your proposed production allocation.

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