Java Planet, Inc., produces two basic types of espresso makers, Model A and Mode

Question

Java Planet, Inc., produces two basic types of espresso makers, Model A and Model B. Pertinent data are EEE (Click the icon to view the data.) The specialty coffee craze suggests that Java Planet can sell enough of either Model A or Model B to keep the plant operating at full capacity. Both products are processed through the same production departments. Requirement 1. Which products should be produced? Briefly explain your answer. Data Table Requirement 1. Which products should be produced? Briefly explain your answer Before determining which products to produce, let's calculate the contribution margin per unit and the c al places, X.xx) Per Unit Model A Model B $ 150.00S 105.00 Model A Model B Selling price Costs Direct material Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Marketing (all variable) 26.0 15.00 27.00 10.50 3.25 13.00 68.75 S 36.25 contribution margin per unit 21.0 6.5 15.0 86 - Contribution margin per machine hour Total cost $63.50 Operating income Choose from any list or enter any number in the input fields and then click Check Answer Allocated on the basis of machine-hours

Explanation / Answer

*Machine hour per unit is calculated as ratio between variable manufacturing overhead per unit i.e., 21:10.50 :: 2:1

If machine hour is constraint, Model B must be produced first upto requirement and second preference be given to Model A because contribution per machine hour is more in Model B.

Disclaimer: Units to be produced for each model can not be provide due to lack of information wrt total machine hour available and maximum demand.

Per Unit Particulars Model A ($) Model B ($) Selling Price (a) 150 105 Variable Cost (b) Direct Material (i) 26 15 Direct manufacturing Labour (ii) 18 27 Variable manufacturing overhead (iii) 21 10.50 Marketting (all variable) (iv) 15 13 Total variable Cost (b = i+ii+iii+iv) 80 65.50 Contribution per unit (c = a-b) 70 39.50 Ranking based on (c) First Second Machine hour per unit* (d) 2 1 Contribution per machine hour (e = c/d) 35 39.5 Raning based on (e) Second First

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