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 $239,000 for the company as a whole. In addition, the following information is available about the three products:

	Large		Medium		Small
Unit selling price	$216		$83		$623
Unit variable cost	(170)		(68)		(548)
Unit contribution margin	$ 46		$ 15		$ 75
Autoclave hours per unit	4		2		6
Total process hours per unit	12		6		12
Budgeted units of production	3,900		3,900		3,900

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

	Large	Medium	Small	Total
Units produced	fill in the blank 1	fill in the blank 2	fill in the blank 3
Revenues	$fill in the blank 4	$fill in the blank 5	$fill in the blank 6	$fill in the blank 7
Variable costs	fill in the blank 8	fill in the blank 9	fill in the blank 10	fill in the blank 11
Contribution margin	$fill in the blank 12	$fill in the blank 13	$fill in the blank 14	$fill in the blank 15
Fixed costs				fill in the blank 16
Operating income				$fill in the blank 17

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
Contribution margin	$fill in the blank 18	$fill in the blank 19	$fill in the blank 20
Autoclave hours per unit	fill in the blank 21	fill in the blank 22	fill in the blank 23
Unit contribution margin per production bottleneck hour	$fill in the blank 24	$fill in the blank 25	$fill in the blank 26

Answer 1