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 $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. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent. 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. Large Medium Small Unit contribution margin $ $ $ Autoclave hours per unit Unit contribution margin per production bottleneck hour $ $ $

Answer 1

a
	Large	Medium	Small	Total
Units produced	3000	3000	3000
Revenues	552000	480000	300000	1332000
Less: Variable costs	390000	360000	228000	978000
Contribution margin	162000	120000	72000	354000
Less: Fixed costs				85000
Income from operations				269000
b
	Large	Medium	Small
Unit contribution margin	54	40	24
Autoclave hours per unit	3	2	1
Unit contribution margin per production bottleneck hour	18	20	24