could be produced using existing factory, selling, and administrative capacity.
ID: 2555951 • Letter: C
Question
could be produced using existing factory, selling, and administrative capacity. a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. b. Based on the differential analysis in part (a), should the proposal be accepted? PR 24-6A Product pricing and profit analysis with bottleneck operations of these products (grades) has high demand in the market, and Hercules is able to sell as The variable conversion cost is $15 per process hour. The fixed cost is $200,000. In addition, OBJ. 3 Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each much as it can produce of all three. The furnace operation is a bottlen and is running at 100% of capacity. Hercule s wants to improve steel operation profitability. the cost analyst was able to determine the following information about the three products: Regular Grade High Grade 5,000 Good Grade 5,000 Budgeted units produced Total process hours per unit Furnace hours per unit Unit selling price Direct materials cost per unit 5,000 10 2.5 $250 $80 12 280 $90 3 $270 $84 5 Continued)Explanation / Answer
Answer:
1
Types of the product
High Grade
Good Grade
Regular Grade
Budgeted Units of Production (given)
5000
5000
5000
Unit Selling Price (A)
280
270
250
Direct Material (B)
90
84
80
Variable Processing Cost (C)
For HG=15*12=180
For GG=15*11=180
For RG=15*10=180
180
165
150
Variable Cost per unit (D=B+C)
270
249
230
Contribution per unit production(A-D)
10
21
20
_________________________________________________________
2
High Grade
Good Grade
Regular Grade
Contribution per unit production(A)
10
21
20
Divided By
Furnace Hours used (B)
4
3
2.5
Contribution per Furnace hour (c= A/B)
2.5
7
8
Rank
3
2
1
Types of the product
High Grade
Good Grade
Regular Grade
Budgeted Units of Production (given)
5000
5000
5000
Unit Selling Price (A)
280
270
250
Direct Material (B)
90
84
80
Variable Processing Cost (C)
For HG=15*12=180
For GG=15*11=180
For RG=15*10=180
180
165
150
Variable Cost per unit (D=B+C)
270
249
230
Contribution per unit production(A-D)
10
21
20
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