Here is an assignment I am working on. I know how to do A and B but I need help

Question

Here is an assignment I am working on. I know how to do A and B but I need help with C and D. thanks

Factoring resource constraints into product mix decisions

Rose Incorporated manufactures two types of vases, small and large. The following per-unit data are available.

                                                                                        Small Vase         Large Vase

Sale price                                                                           $60                       $100

Variable costs                                                                  $35                         $60

Machine hours required for 1 vase                              1                              2

Total fixed costs are $600,000, and Rose Incorporated can sell a maximum of 25,000 units of each type of vase annually. Machine hour capacity is 50,000 hours per year.

a.Determine the contribution margin per unit for each type of vase.

b.Determine the contribution margin per machine hour for each type of vase.

c.Determine the number of units of each style of vase that Rose Incorporated should produce to maximize operating income.

d.What is the dollar amount of the maximum operating income as calculated in C above?

Explanation / Answer

Solution-

Variable-costing income statement Detail Units Per unit($) Per unit($) Selling Price   1 60 100 Variable Cost   2 35 60 Contribution Margin 3(2-1) 25 40 Machine hours required 1 2 Contribution Margin per Machine hour 25 20 Maximum Sales 25,000 25,000 Total Machine hours required 25000 50000 Since CPM pe rmachine hour is more in small vase and it is a limtied commodity it should produce first small vase and then use rest of machine hours in making large vase Production/Sales 25000 12500 (25000/2) Variable-costing income statement Detail Units Per unit($) Per unit($) Sales (Small Vase) 25,000 60 $      1,500,000 Sales (Large Vase) 12,500 100 $      1,250,000 Total Sales $   2,750,000 Variable Cost (Small Vase) 25,000 35 $          875,000 Variable Cost (Large Vase) 12,500 60 $          750,000 Total Variable Cost $      1,625,000 Contribution Margin $      1,125,000 Fixed Cost $          600,000 Income $          525,000

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