Tanek Industries manufactures and sells three different models of wet-dry shop v
ID: 2339539 • Letter: T
Question
Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Product Eco Standard Deluxe Selling price Variable costs and expenses Machine hours required $30 $16 0.5 $51 $ 20 0.8 $101 $47 1.6 Calculate contribution margin per unit. Product Economy Standard Deluxe Contribution margin per unit $ eTextbook and Media gnoring the machine time constraint, which single product should Tanek Industries produce? eTextbook and Media What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, eg. 10.50.) Economy Standard Deluxe Contribution margin per limited resource eTextbook and Media If additional machine time could be obtained, how should the additional time be used? The additional time should be used to produce the product. eTextbook and MediaExplanation / Answer
Working
Economy
Standard
Deluxe
A
Sales price (per unit)
$ 30.00
$ 51.00
$ 101.00
B
Variable cost (per Unit)
$ 16.00
$ 20.00
$ 47.00
D=A-B
Contribution per unit
$ 14.00
$ 31.00
$ 54.00
Ignoring the machine time constraint , Tanek industries should produce Deluxe vacuum cleaners .
The decision is deluxe product because it gives the maximum contribution margin per unit.
Working
Economy
Standard
Deluxe
A
Contribution per unit
$ 14.00
$ 31.00
$ 54.00
B
Machine hour required per unit
0.5
0.8
1.6
C=A/B
Contribution per limited resource
$ 28.00
$ 38.75
$ 33.75
If additional machine time could be obtained. The additional time should be used to produce Standard vacuum cleaners
Standard product gives highest Contribution margin per limited resource so it will benefit the most if produced and sold.
Answer part a=Deluxe vacuum cleaners .
Answer part b = Standard vacuum cleaners
Working
Economy
Standard
Deluxe
A
Sales price (per unit)
$ 30.00
$ 51.00
$ 101.00
B
Variable cost (per Unit)
$ 16.00
$ 20.00
$ 47.00
D=A-B
Contribution per unit
$ 14.00
$ 31.00
$ 54.00
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