Exam 31: Profitability Analysis

The management of Mccreadie Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10,400 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?

If sales revenues are used in the denominator in the profitability index for a product then:

The management of Coppler Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9,700 minutes each month. -What is the maximum contribution margin the company can earn per month?

Garwood Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 10,100 minutes each month. Each unit of product K56J requires 10 minutes on this machine and each unit of product L72D requires 6 minutes on this machine. -The company is considering launching a new product that would have a variable cost of $51.00 per unit.It would require 14 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Absolute profitability is concerned with the impact on an organization's overall profits of adding or dropping a particular segment-without making any other changes.

The management of Bachor 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. -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 opportunity cost per unit of the constrained resource.

The management of Mccreadie Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10,400 minutes each month. -How many units of product L33Y should be produced each month?

Shorr 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 U29D requires 16 minutes on this machine and each unit of product X43P requires 2 minutes on this machine. -How many units of product U29D should be produced each month?

Heilmann Corporation would like to determine the relative profitability of a number of jobs.For example,job S96T has revenues of $68,000 and avoidable costs of $54,400,resulting in an incremental profit of $13,600.The job requires 170 hours of the constrained resource.The job is responsible for 10% of the company's total profit for the period.What is the profitability index for job S96T?

The management of Bachor 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. -The company is considering launching a new product that would have a variable cost of $53.00 per unit.It would require 4 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Beatie 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 K56L: What is the profitability index for product K56L?

When long-term investment funds are the constraint and the company is choosing from among potential long-term projects,the profitability index should be computed by dividing the expected market share of the project by the amount of long-term investment funds required by the project.

Ockerman 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 A31N is $144.00 and its unit variable cost is $115.20.One unit of the product requires 6 ounces of the constrained resource.Monthly sales are 5,700 units.What is the profitability index for product A31N?

Wakeland Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 10,300 minutes each month. Each unit of product F61C requires 5 minutes on this machine and each unit of product E01W requires 7 minutes on this machine. -What is the maximum contribution margin the company can earn per month?

Lesser 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?

Vanscoter Corporation has designed a new product,R83,whose variable cost is $86.60 per unit and that requires 3.10 minutes of the constrained resource.The opportunity cost is $38.00 per minute used of the constrained resource.What is the minimum acceptable selling price for the new product?

Gorey Products Inc. makes two products—K36L and W81H. Product K36L's selling price is $345.00 and its unit variable cost is $310.50. Product W81H's selling price is $256.00 and its unit variable cost is $230.40. The monthly demand is 430 units for product K36L and 890 units for W81H. The constrained resource is a particular machine that is available for 10,000 minutes each month. Each unit of product K36L requires 15 minutes on this machine and each unit of product W81H requires 8 minutes on this machine. -How many units of product K36L should be produced each month?

Martorell Products Inc. makes two products—C39X and H08L. Product C39X's selling price is $54.00 and its unit variable cost is $43.20. Product H08L's selling price is $496.00 and its unit variable cost is $446.40. The monthly demand is 2,500 units for product C39X and 510 units for H08L. The constrained resource is a particular machine that is available for 10,300 minutes each month. Each unit of product C39X requires 3 minutes on this machine and each unit of product H08L requires 16 minutes on this machine. -How many units of product H08L should be produced each month?

Wholey Corporation has designed a new product,I00,whose variable cost is $139.70 per unit and that requires 7.90 minutes of the constrained resource.The opportunity cost is $51.00 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 I00?