Exam 18: Profitability Analysis

Florez Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 10,000 minutes each month. Each unit of product U98W requires 19 minutes on this machine and each unit of product M01S requires 7 minutes on this machine. -How many units of product U98W should be produced each month?

The management of Cerruto Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9,600 minutes each month. -Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Wakeman Products Inc. makes two products-W28H and Z28D. Product W28H's selling price is $27.00 and its unit variable cost is $21.60. Product Z28D's selling price is $170.00 and its unit variable cost is $153.00. The monthly demand is 2,030 units for product W28H and 730 units for Z28D. The constrained resource is a particular machine that is available for 9,500 minutes each month. Each unit of product W28H requires 3 minutes on this machine and each unit of product Z28D requires 10 minutes on this machine. -Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Sabat Corporation has two products-S94 and T88-that use the same constrained resource-a critical raw material. Data concerning those products follow: The total amount of the constrained resource available is 10,400 grams. Required: a. Which product is most profitable, given the company's constraint? b. How much of each product should be produced? c. What is the total contribution margin if your plan in part (b) above is followed?

A company that makes horsehair cowboy belts cannot meet the demand for belts due to a limited supply of artisans who know how to make the belts. To determine which models of the cowboy belts should be emphasized, the company should rank the models by dividing the selling price of each model by the amount of time an artisan requires to make the model.

Llano Corporation has four products that use the same constrained resource. Data concerning those products appear below: The company does not have enough of the constrained resource to satisfy for demand of all four products. Required: a. If salespersons are paid commissions that are a set percentage of sales, which product would they prefer to sell? In other words, if it is a choice between selling one unit of one product and one unit of another, which product would they prefer to sell? b. From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?

The constraint at Angstadt Inc. is a key raw material. A total of 9,700 ounces of this constrained resource are available. Data concerning the company's two products, B03 and P22, appear below: Each unit of product B03 requires 6 ounces of the constrained raw material; each unit of product P22 requires 2 ounces. Required: a. In the present circumstances, which product is most profitable? b. How much of each product should be produced? c. The company is considering launching a new product whose variable cost is $158 and that requires 14 ounces of the constrained resource. What is the minimum acceptable selling price for the new product?

Hofbauer Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 10,400 minutes each month. Each unit of product M73O requires 6 minutes on this machine and each unit of product M26B requires 8 minutes on this machine. -How many units of product M26B should be produced each month?

Righter Corporation is considering six jobs for the upcoming period. Those jobs are listed below, along with relevant data. The total amount of the constrained resource that is available during the upcoming period is 66 hours. Required: a. Determine which jobs should be accepted for the upcoming period. b. Determine the total incremental profit for the upcoming period if your plan from part (a) above is adopted.

The management of Cerruto Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9,600 minutes each month. -What is the maximum contribution margin the company can earn per month?

When a company has a production constraint, the selling price of any new product should cover both its variable cost and the opportunity cost involved in using the constrained resource.

Hofbauer Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 10,400 minutes each month. Each unit of product M73O requires 6 minutes on this machine and each unit of product M26B requires 8 minutes on this machine. -Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Schlaefer LLC is a consulting firm that is considering six projects for the upcoming period. The six projects under consideration are listed below, along with relevant data. The managing partner's time is the constraint in the firm. Only 113 hours of this constrained resource are available during the upcoming period. Required: a. Determine which projects should be accepted for the upcoming period. b. Determine the total incremental profit for the upcoming period if your plan from part (a) above is adopted.

Blomstrom Products Inc. makes two products-N81W and V55S. Product N81W's selling price is $20.00 and its unit variable cost is $12.00. Product V55S's selling price is $108.00 and its unit variable cost is $97.20. The monthly demand is 3,940 units for product N81W and 1,140 units for V55S. The constrained resource is a particular machine that is available for 10,400 minutes each month. Each unit of product N81W requires 2 minutes on this machine and each unit of product V55S requires 6 minutes on this machine. -How many units of product V55S should be produced each month?

Letze Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions. The company has provided the following data for product I69Y: What is the profitability index for product I69Y?

Mcbee Products Inc. makes two products-C38S and V81Z. Product C38S's selling price is $91.00 and its unit variable cost is $72.80. Product V81Z's selling price is $200.00 and its unit variable cost is $180.00. The monthly demand is 890 units for product C38S and 680 units for V81Z. The constrained resource is a particular machine that is available for 10,000 minutes each month. Each unit of product C38S requires 7 minutes on this machine and each unit of product V81Z requires 10 minutes on this machine. -What is the maximum contribution margin the company can earn per month?

The management of Radke Corporation has provided the following data concerning its two products-F74 and E50: The constrained resource is a particular machine that is available for 10,200 minutes each month. Each unit of product F74 requires 7 minutes on this machine. Each unit of product E50 requires 16 minutes on this machine. -What is the maximum contribution margin the company can earn per month?

Kuchler Corporation has four products that use the same constrained resource. Data concerning those products appear below: The company does not have enough of the constrained resource to satisfy for demand of all four products. -From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?

Relative profitability should be measured by dividing the incremental profit from a segment by the amount of the constrained resource required by that segment.

The management of Dando Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10,100 minutes each month. -How many units of product Y43L should be produced each month?