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 $101,000 for the company as a whole. In addition, the following information is available about the three products:

	Large		Medium		Small
Unit selling price	$141		$248		$224
Unit variable cost	111		203		197
Unit contribution margin	$ 30		$ 45		$ 27
Autoclave hours per unit	4		6		2
Total process hours per unit	12		12		6
Budgeted units of production	2,200		2,200		2,200

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)
Particulars	Large	Medium	Small	Total
Units produced	2200	2200	2200	6600
Revenues	310200	545600	492800	1348600
	(141*2200)	(2200*248)	(2200*224)	(310200+545600+492800)
Variable costs	244200	446600	433400	1124200
	(111*2200)	(203*2200)	(197*2200)	(244200+446600+433400)
Contribution Margin	66000	99000	59400	224400
Fixed costs				101000
Income from operations (224400 - 101000)				123400

(b)
Particulars	Large	Medium	Small
Contribution Margin	30	45	27
Auto clave hours per unit	4	6	2
Unit contribution margin per production bottleneck hour	7.5	7.5	13.5
	(30/4)	(45/6)	(27/2)