Exam 13: Profitability Analysis

Redshaw Corporation has provided the following data concerning its two products: The profitability index for product N43J is closest to:

Corner 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 91 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 opportunity cost of using a unit of the constrained resource in a volume trade-off decision is determined by the profitability index of the product whose production would be cut back as a result of using the constrained resource.

Jacobus 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. 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?

Locken Products Inc.makes two products-Q96T and T62D.Product Q96T's selling price is $48.00 and its unit variable cost is $33.60.Product T62D's selling price is $190.00 and its unit variable cost is $152.00.The monthly demand is 3, 340 units for product Q96T and 730 units for T62D.The constrained resource is a particular machine that is available for 10, 400 minutes each month.Each unit of product Q96T requires 2 minutes on this machine and each unit of product T62D requires 10 minutes on this machine. How many units of product T62D should be produced each month?

Locken Products Inc.makes two products-Q96T and T62D.Product Q96T's selling price is $48.00 and its unit variable cost is $33.60.Product T62D's selling price is $190.00 and its unit variable cost is $152.00.The monthly demand is 3, 340 units for product Q96T and 730 units for T62D.The constrained resource is a particular machine that is available for 10, 400 minutes each month.Each unit of product Q96T requires 2 minutes on this machine and each unit of product T62D 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?

When a company has a production constraint, the opportunity cost of using the constrained resource can be determined by multiplying the amount of the constrained resource used by the cost per unit of the most profitable product.

The management of Claypole Corporation has provided the following data concerning its two products-H59 and C92: The constrained resource is a particular machine that is available for 10, 100 minutes each month.Each unit of product H59 requires 5 minutes on this machine.Each unit of product C92 requires 3 minutes on this machine. The company is considering launching a new product that would have a variable cost of $88.00 per unit.It would require 11 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

To encourage salespersons to sell the most profitable products, they should be paid sales commissions based on the profitability index and the amount of constraint time sold rather than on sales revenue.

The management of Lowndes Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9, 800 minutes each month. How many units of product G92X should be produced each month?

Minaya Corporation has two products, M20 and Y53, that use the same constrained resource-a critical raw material.Data concerning those products follow: The total amount of the constrained resource available is 9, 900 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?

Tansley Corporation has two products that use the same constrained resource-a critical raw material. The total amount of the constrained resource available is 9, 500 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 $167 and that requires 16 grams of the constrained resource.What is the minimum selling price for the new product?

The absolute profitability of a segment is measured by subtracting the segment's avoidable costs from its revenues.

The management of Lowndes Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9, 800 minutes each month. What is the maximum contribution margin the company can earn per month?

The management of Liess Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9, 500 minutes each month. What is the maximum contribution margin the company can earn per month?

Dimuzio Corporation has designed a new product, V06, whose variable cost is $145.30 per unit and that requires 5.00 minutes of the constrained resource.The opportunity cost is $70.00 per minute used of the constrained resource. Required: What advice would you give to the company concerning the price that should be charged for the new product V06?