Determine the contribution margin by glass type

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Reference no: EM132687498

Problem - Product decisions under bottlenecked operations

Pennsylvania Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Pennsylvania 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

$140

$115

$100

Unit variable cost

110

94

88

Unit contribution margin

$30

$21

$12

Autoclave hours per unit

4

2

1

Total process hours per unit

8

6

3

Budgeted units of production 

3,000

3,000

3,000

Required -

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

b. Prepare an analysis showing which product is the most profitable per bottleneck hour.

Reference no: EM132687498

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