Question

Cranston Corporation makes four products in a single facility. Data concerning these products appear below: Products A B C D Selling price per unit $ 42.30 $ 50.00 $ 37.60 $ 33.50 Variable manufacturing cost per unit $ 20.80 $ 30.70 $ 21.00 $ 19.90 Variable selling cost per unit $ 2.70 $ 2.10 $ 1.00 $ 2.40 Milling machine minutes per unit 3.30 4.10 2.60 1.30 Monthly demand in units 1,000 4,000 3,000 3,000 The milling machines are potentially the constraint in the production facility. A total of 28,200 minutes are available per month on these machines. Which product makes the LEAST profitable use of the milling machines? (Round your intermediate calculations to 2 decimal places.) Multiple Choice Product A Product B Product C Product D

Answer 1

Answer:

Product B

Prod A Prod B Prod C Prod D  

$ 42,3 $ 50,0 $ 37,6 $ 33,5 Selling Price

-$ 20,8 -$ 30,7 -$ 21,0 -$ 19,9 Variable Manufacturing

-$ 2,7 -$ 2,1 -$ 1,0 -$ 2,4 Variable Selling

$ 18,8 $ 17,2 $ 15,6 $ 11,2 Contribution Margin

    3,3          4,1      2,6     1,3 Minutes per Unit

$ 5,70 $ 4,20 $ 6,00 $ 8,62 Contr. Margin/Minutes

1.000   3.220   3.000   3.000  Quantity

3.300   13.200   7.800   3.900  Minutes Hours Shortage

$ 18.800 $ 55.376$ 46.800$ 33.600 Contribution Margin

Explanation:

To know the production over the shortage of hours it's necessary  to calculate how much it's the Contribution Marging per minute of Machine.

Contr. Margin/Minute ProdA -> $5,7, ProdB -> $4,2, ProdC -> $6, ProdD -> $8,62

Once you have the number you produce as much as you can of the product with the higher Contribution Margin per hour.

As it's detailed: 3000 Units of ProdD and ProdC,  1000 Units of ProdA and 3220 Units of ProdB.

The LEAST profitable product considering the milling machine it's product B, which get a Contribution Margin per Minut of $4,20.