Question

Product Decisions Under Bottlenecked Operations Youngstown Glass Company manufactures three types of safety plate glass: large,...

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 $85,000 for the company as a whole. In addition, the following information is available about the three products:

   Large    Medium    Small
Unit selling price $184 $160 $100
Unit variable cost 130 120 76
Unit contribution margin $ 54 $ 40 $ 24
Autoclave hours per unit 3 2 1
Total process hours per unit 5 4 2
Budgeted units of production 3,000 3,000 3,000

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.

Large     Medium     Small    
Contribution margin $ $ $
Autoclave hours per unit
Unit contribution margin per production bottleneck hour $ $ $

Homework Answers

Answer #1
  • Requirement [a]

Large     

Medium     

Small     

Total     

Units produced

3000

3000

3000

Revenues

$552,000

$480,000

$300,000

$1,332,000

Variable costs

$390,000

$360,000

$228,000

$978,000

Contribution margin

$162,000

$120,000

$72,000

$354,000

Fixed costs

$85,000

Income from operations

$269,000

  • Requirement [b]

Large    

Medium    

Small    

A

Contribution margin

$54.00

$40.00

$24.00

B

Autoclave hours per unit

3

2

1

C = A/B

Unit contribution margin per production bottleneck hour

$18.00

$20.00

$24.00

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