Exam 15: Profitability Analysis

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?

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.

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?

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

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?

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?

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 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?

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 total expected revenues from the project by the amount of long-term investment funds required by the project.

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.

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?

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. -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?

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?

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?

The management of Schacher Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10,300 minutes each month. -What is the maximum contribution margin the company can earn per month?

Rognstad Corporation would like to determine the relative profitability of a number of jobs.For illustration purposes,the company has provided the following data for job M38S: What is the profitability index for job M38S?

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?

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 constrained resource at Schiller Corporation is a key raw material.A total of 9,900 ounces of the constrained resource are available.Data concerning the company's two products follow: Product F57 requires 15 ounces of the constrained resource;product I66 requires 5 ounces. 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?

The management of Schacher Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 10,300 minutes each month. -How many units of product J35V should be produced each month?