Product Decisions Under Bottlenecked Operations Youngstown Glass Company manufac

Question

Product Decisions Under Bottlenecked Operations

Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $285,000 for the company as a whole. In addition, the following information is available about the three products:

a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent.

   Large    Medium    Small Unit selling price $254 $66 $647 Unit variable cost 200 54 569 Unit contribution margin $ 54 $ 12 $ 78 Autoclave hours per unit 4 2 6 Total process hours per unit 12 4 18 Budgeted units of production 4,400 4,400 4,400

Explanation / Answer

a Large      Medium      Small      Total      Units produced 4400 4400 4400 Revenues 1117600 290400 2846800 4254800 Variable costs 880000 237600 2503600 3621200 Contribution margin 237600 52800 343200 633600 Fixed costs 285000 Income from operations 348600 b Large     Medium     Small     Contribution margin 54 12 78 Autoclave hours per unit 4 2 6 Unit contribution margin per production bottleneck hour 13.5 6 13

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