Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 + 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 + 5,000 +5,000 $ 2.60 $4.40 Operating income Number of units Operating income per unit Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: 6 hours 6 hours 12 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.
Product Decisions Under Bottlenecked Operations Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows: Type 5 Type 10 Type 20 $43,000 $(34,000) (8,000) $(42,000) $ 1,000 + 5,000 $ 0.20 Revenues Variable cost Fixed cost Total cost $49,000 $56,500 $(28,000) $(26,500) (8,000) (8,000) $(36,000) $(34,500) $13,000 $22,000 + 5,000 +5,000 $ 2.60 $4.40 Operating income Number of units Operating income per unit Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows: 6 hours 6 hours 12 hours Type 5: Type 10: Type 20: The Marketing Department is considering a new marketing and sales campaign. Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Product Decisions Under Bottlenecked Operations
Mill Metals Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows:
Type 5
Type 10
Type 20
$43,000
$(34,000)
(8,000)
$(42,000)
$ 1,000
÷ 5,000
$ 0.20
Revenues
Variable cost
Fixed cost
Total cost
Operating income
Number of units
$49,000
$56,500
$(28,000) $(26,500)
(8,000)
(8,000)
$(36,000)
$(34,500)
$13,000
$22,000
÷ 5,000
÷ 5,000
$ 2.60
$4.40
Operating income per unit
Mill's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production
bottleneck. The furnace hours required per unit of each product are as follows:
6 hours
6 hours
Type 5:
Type 10:
Type 20:
The Marketing Department is considering a new marketing and sales campaign.
Determining the unit contribution margin per furnace hour will assist in making your decision. Round the unit contribution margin to two decimal places.
12 hours
Transcribed Image Text:Type 5
Type 10
Type 20
Unit contribution margin per furnace hour
Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?
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