Manning Industries manufactures and sells three different models of wet-dry shop
ID: 2346188 • Letter: M
Question
Manning 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. Manning is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows.Product
Economy Standard Deluxe
Selling price $30 $50 $100
Variable costs and expenses $12 $18 $42
Machine hours required .5 .8 1.6
Ignoring the machine time constraint, which single product should Manning Industries produce?
What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, e.g. 25.25.)
Economy $
Standard $
Deluxe $
If additional machine time could be obtained, how should the additional time be used?
Explanation / Answer
Ignoring the machine time constraint, which single product should Manning Industries produce? contribution margin: Economy: 30 – 12 = 18 Standard: 50 – 18 = 32 Deluxe: 100 – 42 = 58 Ignoring the machine time constraint, they should make the deluxe. What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, e.g. 25.25.) Economy: 18/.5 = 36 Standard: 32/.8 = 40 Deluxe: 58/1.6 = 36.25 Economy $ 36.00 Standard $ 40.00 Deluxe $ 36.25 If additional machine time could be obtained, how should the additional time be used? Make the standard, since it has the highest contribution margin per machine time.
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