6-A2. The Ibunez Tool Company has two products: a plain circular saw and a profe

Question

6-A2. The Ibunez Tool Company has two products: a plain circular saw and a professional circular saw. The plan saw sells for $70 and has a variable cost of $50. The professional saw sells for $100 and has a variable cost of $70.


1.Compute contribution margins and contribution-margin ratios for plain and professional saws.


2. The demand is for more units than the company can produce. There are only 20,000 machine hours of manufacturing capacity available. Two plain saws can be produced in the same average time (1 hour) needed to produce one professional saw. Compute the total contribution margin for 20,000 hours for plain saws only and for professional saws only. Which product is the best use of machine hours?


3. Use two or three sentences to state the major lesson of this problem.

Explanation / Answer

1.Compute contribution margins and contribution-margin ratios for plain and professional saws. plain circular saw professional circular saw selling price $70 $100 variable cost $50. $70 Contribution per unit $20 $30 Contribution margin ratio 28.57% 30% 2. The demand is for more units than the company can produce. There are only 20,000 machine hours of manufacturing capacity available. Two plain saws can be produced in the same average time (1 hour) needed to produce one professional saw. Compute the total contribution margin for 20,000 hours for plain saws only and for professional saws only. Which product is the best use of machine hours? plain circular saw professional circular saw selling price $70 $100 variable cost $50. $70 Contribution per unit $20 $30 Machine hours required 0.5 1.0 Contribution per machine Hour $40 $30 Total contribution for 20000 hours $800,000 $600,000 Plain circular saw is the best use of Machine hour. 3. Use two or three sentences to state the major lesson of this problem. The Major lesson from this problem is that we should use maximum Machine hours to manufacture Plain circular saw.

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.