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 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 $244,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $254 $231 $141 Unit variable cost 200 189 124 Unit contribution margin $ 54 $ 42 $ 17 Autoclave hours per unit 4 6 2 Total process hours per unit 12 18 4 Budgeted units of production 4,800 4,800 4,800 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 $ $ $ $ Less: Variable costs Contribution margin $ $ $ $ Less: 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 Unit contribution margin $ $ $ Autoclave hours per unit Unit contribution margin per production bottleneck hour $ $ $

Answer 1

a)

	Large	Medium	Small	Total
Sales revenue	4800*254= 1219200	4800*231=1108800	4800*141=676800	3004800
less:variable cost	4800*200=960000	4800*189=907200	4800*124= 595200	2462400
Contribution margin	4800*54=259200	4800*42=201600	4800*17=81600	542400
Less:fixed cost				(244000)
Net				298400

B)Since Large sized safety plate glass generates highest contribution per autoclave hours which is a bottleneck resource ,It is a most profitable per bottleneck hour

	Large	Medium	Small
Unit contribution margin	54	42	17
Number of Autoclave hours per unit	4	6	2
Contribution per autoclave hours	54/4=13.5	42/6=7	17/2=8.5