At Powder Coat, Inc., the powder-coating process is a bottleneck. Typically, it

Question

At Powder Coat, Inc., the powder-coating process is a bottleneck. Typically, it takes approximately two hours to switch between jobs. The time is spent cleaning nozzles and paint tanks and recalibrating equipment. Currently the company runs relatively small batch sizes through the process but is considering increasing them to reduce setup time.

With small batch sizes, powder coating can process approximately 2,100 units per 8 hour shift, and products have an average contribution margin of $54. With large batch sizes, powder coating can process approximately 2,990 units per 8-hour shift.

What is the additional profit associated with running larger batch sizes through the powder-coating process?

$_______________________

Explanation / Answer

since contribution margine is equal for all products ,I Assumed that the Small Size And Large size products have smae selling price as well as Variable cost.
The additional /marginal profit associated with the large batch size through the powder coating process is $48060
Since
on avarage in 8 hour shift
Large bacth size can be processed      =  2990 units
less : samall size can be processed     =  2100 units
additional units from largesize batch  =    890 units
contribution margine per unit is $54
there fore additional profit = $54*890 = $48060 [gross margine only]
Note: Profit can be arrived only when it is deduct from fixed cost.

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