Exam 15: Profitability Analysis

Lilienthal Products Inc.makes two products--M38O and E34G.Product M38O's selling price is $145.00 and its unit variable cost is $87.00.Product E34G's selling price is $300.00 and its unit variable cost is $210.00.The monthly demand is 1,590 units for product M38O and 640 units for E34G.The constrained resource is a particular machine that is available for 10,100 minutes each month.Each unit of product M38O requires 5 minutes on this machine and each unit of product E34G requires 10 minutes on this machine. -How many units of product E34G should be produced each month?

Attleson Corporation has designed a new product,R94,whose variable cost is $122.90 per unit and that requires 6.70 minutes of the constrained resource.The opportunity cost is $58.00 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 R94?

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?

Tevlin 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 H90X: What is the profitability index for job H90X?

Wakeman Products Inc.makes two products--W28H and Z28D.Product W28H's selling price is $27.00 and its unit variable cost is $21.60.Product Z28D's selling price is $170.00 and its unit variable cost is $153.00.The monthly demand is 2,030 units for product W28H and 730 units for Z28D.The constrained resource is a particular machine that is available for 9,500 minutes each month.Each unit of product W28H requires 3 minutes on this machine and each unit of product Z28D requires 10 minutes on this machine. -How many units of product Z28D should be produced each month?

Sabat Corporation has two products--S94 and T88--that use the same constrained resource--a critical raw material.Data concerning those products follow: 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?

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. -How many units of product U98W should be produced each month?

The same constrained resource is used by four different products at Porraz 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?

If a company is considering accepting a number of jobs,but there is insufficient production capacity to do all of them,then the profitability index can be used to rank the jobs and decide which should be accepted.

Mccraig Corporation would like to determine the relative profitability of a number of jobs.For example,job S35A has revenues of $52,000 and avoidable costs of $36,400,resulting in an incremental profit of $15,600.The job requires 260 hours of the constrained resource.The job is responsible for 8% of the company's total profit for the period.What is the profitability index for job S35A?

Relative profitability should be measured by dividing the incremental profit from a segment by the amount of the constrained resource required by that segment.

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. -How many units of product M26B should be produced each month?

The same constrained resource is used by four different products at Porraz 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. -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?

Foshie Corporation is about to launch a new product,H16,whose variable cost is $104.30 per unit and that would require 6.00 centiliters of a key raw material that is the company's constrained resource.The opportunity cost of this raw material is $54.00 per centiliter used. Required: What advice would you give to the company concerning the price that should be charged for the new product H16?

The management of Radke Corporation has provided the following data concerning its two products--F74 and E50: The constrained resource is a particular machine that is available for 10,200 minutes each month.Each unit of product F74 requires 7 minutes on this machine.Each unit of product E50 requires 16 minutes on this machine. -The company is considering launching a new product that would have a variable cost of $90.00 per unit.It would require 16 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Vanstraten Corporation has provided the following data concerning its two products: The profitability index for product Z63Z is closest to:

Llano 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. 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?

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. -How many units of product Y43L should be produced each month?

Mcbee Products Inc.makes two products--C38S and V81Z.Product C38S's selling price is $91.00 and its unit variable cost is $72.80.Product V81Z's selling price is $200.00 and its unit variable cost is $180.00.The monthly demand is 890 units for product C38S and 680 units for V81Z.The constrained resource is a particular machine that is available for 10,000 minutes each month.Each unit of product C38S requires 7 minutes on this machine and each unit of product V81Z requires 10 minutes on this machine. -What is the maximum contribution margin the company can earn per month?

Lilienthal Products Inc.makes two products--M38O and E34G.Product M38O's selling price is $145.00 and its unit variable cost is $87.00.Product E34G's selling price is $300.00 and its unit variable cost is $210.00.The monthly demand is 1,590 units for product M38O and 640 units for E34G.The constrained resource is a particular machine that is available for 10,100 minutes each month.Each unit of product M38O requires 5 minutes on this machine and each unit of product E34G requires 10 minutes on this machine. -What is the maximum contribution margin the company can earn per month?