Exam 18: Profitability Analysis

The management of Trachte Corporation is reviewing its policies concerning compensation of salespersons. The company 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?

Deemer Corporation has provided the following data concerning its two products: The profitability index for product T57U is closest to:

Fontana Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9,800 minutes each month. Each unit of product S83E requires 16 minutes on this machine and each unit of product G29P requires 5 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?

Dombrowski Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions. For example, the selling price of product V48Q is $150.00, its unit variable cost is $135.00, and its unit contribution margin is $15.00. One unit of the product requires 6 minutes of the constrained resource. Monthly sales are 5,800 units. What is the profitability index for product V48Q?

The profitability index for a volume trade-off decision involving products should be computed by dividing the unit contribution margin of a product by the selling price of the product.

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. -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?

Podkowka Corporation has two products that use the same constrained resource-a critical raw material. 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? d. The company is considering launching a new product whose variable cost is $112 and that requires 10 grams of the constrained resource. What is the minimum selling price for the new product?

Larsen Corporation has designed a new product, J57, whose variable cost is $61.80 per unit and that requires 3.30 minutes of the constrained resource. The opportunity cost is $31.00 per minute used of the constrained resource. What is the minimum acceptable selling price for the new product?

Fontana Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9,800 minutes each month. Each unit of product S83E requires 16 minutes on this machine and each unit of product G29P requires 5 minutes on this machine. -How many units of product S83E should be produced each month?

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. -What is the maximum contribution margin the company can earn per month?

Kiefert Corporation has provided the following data concerning its two products-A70 and O48: The total amount of the constrained resource available each month is 54,800 grams. Each unit of product A70 requires 8 grams of the constrained resource and each unit of product O48 requires 18 grams. What is the maximum contribution margin the company can earn per month?

Demeester Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9,900 minutes each month. Each unit of product Y56G requires 10 minutes on this machine and each unit of product K46X requires 3 minutes on this machine. -The company is considering launching a new product that would have a variable cost of $79.00 per unit. It would require 14 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be: