Question

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 $143,000 for the company as a whole. In addition, the following information is available about the three products:

	Large		Medium		Small
Unit selling price	$160		$215		$108
Unit variable cost	126		176		95
Unit contribution margin	$ 34		$ 39		$ 13
Autoclave hours per unit	4		6		2
Total process hours per unit	8		12		6
Budgeted units of production	3,700		3,700		3,700

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

	Large	Medium	Small	Total
Units produced
Revenues	$	$	$	$
Variable costs
Contribution margin	$	$	$	$
Fixed costs
Income from operations				$

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	$	$	$
Autoclave hours per unit
Unit contribution margin per production bottleneck hour	$	$	$

Answer 1

a
	Large	Medium	Small	Total
Units produced	3700	3700	3700
Revenues	592000	795500	399600	1787100
Variable costs	466200	651200	351500	1468900
Contribution margin	125800	144300	48100	318200
Fixed costs				143000
Income from operations				175200
b
	Large	Medium	Small
Unit Contribution margin	34	39	13
Autoclave hours per unit	4	6	2
Unit contribution margin per production bottleneck hour	8.5	6.5	6.5
Large is the most profitable per bottleneck hour