Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s
ID: 2478494 • Letter: S
Question
Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s property. Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks are then stacked onto movable metal platforms and rolled into the kiln where they are fired until dry. The dried bricks are then packaged and shipped to retail outlets and contractors. The bottleneck in the production process is the kiln, which is available for 2,000 hours per year. Data concerning the company’s four main products appear below. Products are sold by the pallet.
What would be the total contribution margin for the production plan you have proposed?
The kiln could be operated for more than 2,000 hours per year by running it after normal working hours. Up to how much per hour should the company be willing to pay in overtime wages, energy costs, and other incremental costs to operate the kiln additional hours?
The company is considering introducing a new product, glazed Venetian bricks, whose variable cost would be $820 per pallet and that would require 10 hours in the kiln per pallet. What is the minimum acceptable selling price for this new product?
Salespersons are currently paid a commission of 5% of gross revenues. Will this motivate the salespersons to make the right choices concerning which products to sell most aggressively?
Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s property. Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks are then stacked onto movable metal platforms and rolled into the kiln where they are fired until dry. The dried bricks are then packaged and shipped to retail outlets and contractors. The bottleneck in the production process is the kiln, which is available for 2,000 hours per year. Data concerning the company’s four main products appear below. Products are sold by the pallet.
Explanation / Answer
1a)Total hours required to satisfy would be 2600 hours.
Product
Demand
Hours required per plate
Total hours required
Traditional Brick
90
8
720
Textured Facing
110
8
880
Cinder Block
100
4
400
Roman Brick
120
5
600
2600
1b) there are only 2000 hours available and required hours are 2600. Therefore there is insufficient capacity.
2a) Profitability Index would be contribution margin per plate divided by Hours required per plate.
Product
Traditional Brick
Textured Facing
Cinder Block
Roman Brick
Contribution margin per pallet
472
632
376
440
(/) Hours required per plate
8
8
4
5
Profitability Index
59
79
94
88
2b)
We can rank based on the profitability index.
Rank 1: Cinder block
Rank 2: Roman Bricks
Rank 3: Textured Facing
Rank 4: Traditional Brick
Description
Hours Available
Total hours available
2000
Cinder blocks produced (100x4)
-400
Balance hours
1600
Roman bricks produced (120 x5)
-600
Balance hours
1000
Texured facing ( 110 x8)
-880
Hours available for Traditional bricks
120
No. of traditional bricks produced= Hours available for traditional bricks/ hours per plate
= 120/8
= 15 plates.
Hence production plan is:
Product
Traditional Brick
Textured Facing
Cinder Block
Roman Brick
No. of plates
15
110
100
120
Product
Demand
Hours required per plate
Total hours required
Traditional Brick
90
8
720
Textured Facing
110
8
880
Cinder Block
100
4
400
Roman Brick
120
5
600
2600
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