Consider the Following Cost and Production Information for Hinsley Machine

Essay

Consider the following cost and production information for Hinsley Machine Parts, Inc.

Additional information:
? Sales revenue: $12,500,000
? Beginning inventory: $3,375,000
? The only spending increase was for material cost due to increased production. All other spending as shown above was unchanged.
? Sales of all parts are the same as the number of units produced.
(a) Compute the throughput contribution margin, operating income and ending inventory for Hinsley Machine Parts, Inc.
(b) Assume that production of part D-1251 increases by 25 units during the given period (sales remain constant). Re-compute the above figures.
(c) Diana Holinger, the production foreperson, argues that an overall average cost is good enough; it is a waste of resources to compute the costs of individual parts. According to her, Hero's products are better than that of competitors. Therefore, all that needs to be done is to produce more so that the average cost figure goes down. Do you agree? Why or why not?