Chapter 11 Decision Making with a Strategic Emphasis 431 201

Chapter 11 Decision Making with a Strategic Emphasis 431 2011-7] / 11-41 Product-Profit consume lines are as follows ability Analysis, Scarce Resources Creighton Corporation produces a variety of he products. Unit selling prices and costs for three models of one of its product r electronic pro Selling price Direct materials Direct labor (@ $20/hour) Variabie overhead Fixed overhead No Frilis Standard Options Super $86 16 30 $70 14 20 S40 Variable allocated to products on the basis of machine hours. overhead is charged to products on the basis of direct labor dollars; fixed overhead is Required 1. What is fundamentally different about t he fixed versus variable overhead assigned to products? (Answer the in the context of the relevance of this difference to the determination of short-term product mix.) er of 2. Calculate for each product both the gross profit per unit and the contribution margin per u nit. Are eith these profitability measures useful for planning the optimum short-term product mix? Why or why not? 3. If the company has excess machine capacity but a limited amount of labor time, how should the optimum 4. Assume now that machine hours, not direct labor hours, is the limiting resource. How, if at all, would this 5. How can the optimum product mix be determined when there are only two products and one or more 6. How can the optimum product mix be determined when there are more than two products and one or 7. What is the primary role of the management accountant in terms of planning the optimum short- short-term product mix be determined? affect the product-mix decision? constraints? more constraints? term product mix?

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. As per Chegg Policy, if question have more than 4 sub-parts, it should be posted seperatly (Each post can have maximum of 4 sub parts to answer). 1. Fixed Overhead will remain same in total and will change per unit Variable overhead will remain same as per unit however will change in total with volume. 2. No Frills Standard Options Super Sales Price 40 70 86 Less: Variable Cost Direct Material 10 14 16 Direct Labor 10 20 30 Variable Overhead 3 6 9 Contribution margin 17 30 31 No Frills Standard Options Super Sales Price 40 70 86 Less: Manufacturing Cost Direct Material 10 14 16 Direct Labor 10 20 30 Variable Overhead 3 6 9 Fixed Overhead 3 6 6 Gross Margin 14 24 25 Not very useful for planning optimum product mix. Since there may be constrains of Labor hours or Machin hours and if yes, then per hour Margin will hep to plan product mix 3. We need to find out Contribution Margin per Labor Hour. Product which is givine maximum Cont Margin Per LH, should be produced and sold maximum 4. We need to find out Contribution Margin per Machin Hour. Product which is givine maximum Cont Margin Per MH, should be produced and sold maximum