Exam 13: Profitability Analysis

Francke Corporation would like to determine the relative profitability of a number of jobs.For example, job H29O has revenues of $86, 400 and avoidable costs of $69, 120, resulting in an incremental profit of $17, 280.The job requires 160 hours of the constrained resource.The job is responsible for 13% of the company's total profit for the period.What is the profitability index for job H29O?

Nations Corporation has designed a new product, K48, whose variable cost is $56.70 per unit and that requires 3.10 minutes of the constrained resource.The opportunity cost is $39.00 per minute used of the constrained resource.What is the minimum acceptable selling price for the new product?

Luter Products Inc.makes two products-G16F and C53Z.Product G16F's selling price is $308.00 and its unit variable cost is $215.60.Product C53Z's selling price is $84.00 and its unit variable cost is $58.80.The monthly demand is 570 units for product G16F and 2, 200 units for C53Z.The constrained resource is a particular machine that is available for 10, 100 minutes each month.Each unit of product G16F requires 14 minutes on this machine and each unit of product C53Z requires 3 minutes on this machine. How many units of product G16F should be produced each month?

Ebright 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 H25Z is $50.00 and its unit variable cost is $30.00.One unit of the product requires 2 ounces of the constrained resource.Monthly sales are 6, 300 units.What is the profitability index for product H25Z?

The same constrained resource is used by four different products at Hinchcliffe Corporation.Data concerning those products appear below: The company does not have enough of the constrained resource to satisfy for demand of all four products. 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?

Titzer Corporation is about to announce a new product, C02, whose variable cost is $134.80 per unit and that would require 5.90 grams of a raw material that is the constrained resource in the company.The opportunity cost to use this constrained resource is $68.00 per gram.What is the minimum acceptable selling price for the new product?

The management of Tamondong Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10, 200 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?

Reetz Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions.For illustration, the company has provided the following data for product A25H: What is the profitability index for product A25H?

Gastineau Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9, 600 minutes each month.Each unit of product J45Z requires 19 minutes on this machine and each unit of product W47E requires 7 minutes on this machine. The company is considering launching a new product that would have a variable cost of $168.00 per unit and no avoidable fixed costs.It would require 9 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Coviello 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 C98I is $368.00, its unit variable cost is $257.60, and its unit contribution margin is $110.40.One unit of the product requires 16 minutes of the constrained resource.Monthly sales are 4, 400 units.What is the profitability index for product C98I?

A portrait painter has been asked to do far more portraits in the next three months than she has time to paint during that time period.To rank the possible portraits in order of their profitability, she should divide each portrait's estimated incremental profit by the amount of time she estimates it will take to paint the portrait.

Daisley Products Inc.makes two products-B17U and R94X.Product B17U's selling price is $110.00 and its unit variable cost is $66.00.Product R94X's selling price is $238.00 and its unit variable cost is $142.80.The monthly demand is 1, 290 units for product B17U and 490 units for R94X.The constrained resource is a particular machine that is available for 10, 300 minutes each month.Each unit of product B17U requires 5 minutes on this machine and each unit of product R94X requires 14 minutes on this machine. The company is considering launching a new product that would have a variable cost of $178.00 per unit and no avoidable fixed costs.It would require 3 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Krupka Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9, 600 minutes each month.Each unit of product A88V requires 4 minutes on this machine and each unit of product O24M requires 10 minutes on this machine. What is the maximum contribution margin the company can earn per month?

Dills Corporation has provided the following data concerning its two products - O24 and C50: The total amount of the constrained resource available each month is 49, 250 grams.Each unit of product O24 requires 17 grams of the constrained resource and each unit of product C50 requires 5 grams.What is the maximum contribution margin the company can earn per month?

Hamed 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 U57S: What is the profitability index for product U57S?

Daisley Products Inc.makes two products-B17U and R94X.Product B17U's selling price is $110.00 and its unit variable cost is $66.00.Product R94X's selling price is $238.00 and its unit variable cost is $142.80.The monthly demand is 1, 290 units for product B17U and 490 units for R94X.The constrained resource is a particular machine that is available for 10, 300 minutes each month.Each unit of product B17U requires 5 minutes on this machine and each unit of product R94X requires 14 minutes on this machine. How many units of product R94X should be produced each month?

The absolute profitability of a business segment is determined by:

The company is considering launching a new product that would have a variable cost of $119.00 per unit.It would require 17 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

When a company has a production constraint, the selling price of any new product should cover both its fully allocated cost-including common fixed costs-and the opportunity cost involved in using the constrained resource.

Daisley Products Inc.makes two products-B17U and R94X.Product B17U's selling price is $110.00 and its unit variable cost is $66.00.Product R94X's selling price is $238.00 and its unit variable cost is $142.80.The monthly demand is 1, 290 units for product B17U and 490 units for R94X.The constrained resource is a particular machine that is available for 10, 300 minutes each month.Each unit of product B17U requires 5 minutes on this machine and each unit of product R94X requires 14 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?