Exam 15: Profitability Analysis

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. -The company is considering launching a new product that would have a variable cost of $155.00 per unit and no avoidable fixed costs.It would require 5 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

Wang Corporation would like to determine the relative profitability of a number of jobs.For example,the revenue from Job Q86D is $105,300 and its avoidable costs amount to $63,180,resulting in an incremental profit of $42,120.Furthermore,the job requires 270 hours of the constrained resource.What is the profitability index for job Q86D?

Deemer Corporation has provided the following data concerning its two products: The profitability index for product T57U is closest to:

Relative profitability is concerned with ranking business segments for the purpose of making trade-offs among the segments.

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

The management of Cerruto Corporation has provided the following data concerning its two products: The constrained resource is a particular machine that is available for 9,600 minutes each month. -How many units of product U87D should be produced each month?

Demeester 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 Y56G requires 10 minutes on this machine and each unit of product K46X requires 3 minutes on this machine. -The company is considering launching a new product that would have a variable cost of $79.00 per unit.It would require 14 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

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 net present value of a project by the expected total revenues from the project.

Kuchler 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. -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 same constrained resource is used by four different products at Debruin 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?

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. -How many units of product V55S should be produced each month?

The opportunity cost of using one unit of the constrained resource in a volume trade-off decision is equal to: