Week 11 homework questions

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Macquarie University *

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ACCG2000

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Industrial Engineering

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Apr 3, 2024

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docx

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3

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Homework questions due in week 11 tutorial Question 1. What is meant by the term contribution margin per unit of scarce resource? How is this concept used in making product mix decisions? The contribution margin per unit of scarce resource is the profit made from each unit of limited resource used in production. It is used to make product mix decisions by recognising what limited product generates the highest UCM which is given the top priority. Question 2. Sport Luggage Company makes high-end hard-sided luggage for sports equipment. Data concerning three of the company's most popular models appear below. Ski Vault Golf Caddy Fishing Quiver Selling price per unit $220 $300 $175 Variable cost per unit $60 $120 $55 Plastic injection molding machine processing time required to produce one unit 4 minutes 5 minutes 2 minutes kilograms of plastic pellets per unit 5 kgs 6 kgs 5 kgs Required: i. The total time available on the plastic injection molding machine is the constraint in the production process. Which product would be the most profitable use of this? Which product would be the least profitable use of this constraint? Ski vault Golf caddy Fishing quiver Contribution per unit 160 180 120 Machine processing time 4 5 2 CM per unit 160/4 = 40 180/5 = 36 120/2 = 60 Rank 2 3 1 Fishing quiver is most profitable, Golf caddy is least profitable ii. A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection molding machine is no longer the bottleneck. Instead, the constraint is the total available kilograms of plastic pellets. Which product would be the most profitable use of this constraint? Which product would be the least profitable use of this constraint? Ski vault Golf caddy Fishing quiver
Contribution per unit 160 180 120 KGs of Plastic pellets 5 6 5 CM per unit 160/5 = 32 180/6 = 30 120/5 = 24 Rank 1 2 3 Ski vault is the most profitable and fishing quiver is the least profitable iii. Which product has the largest unit contribution margin? Why wouldn't this product always be the most profitable use of the constrained resource? Golf caddy has the highest UCM of $180 but is not always the most profitable as the efficiency in time and materials is also a factor in determining the profitability not just the UCM. Question 3. Great Cooking Company offers monthly service plans for providing prepared meals that are delivered to customers’ homes. The target market for these meal plans includes double-income families with no children, and retired couples in upper income brackets. Great Cooking offers two monthly plans: Premier Cuisine and Haute Cuisine. The Premier Cuisine plan provides frozen meals that are delivered twice each month; this plan generates a contribution margin of $60 for each monthly plan sold. The Haute Cuisine plan provides freshly prepared meals delivered on a daily basis; this plan generates a contribution margin of $45 for each monthly plan sold. Great Cooking's reputation provides the company with a market that will purchase all the meals that can be prepared. All meals go through food preparation and cooking steps in the company's kitchens. After these steps, the Premier Cuisine meals are flash-frozen. The time requirements per monthly meal plan and the hours available per month are as follows: For planning purposes, Great Cooking uses linear programming to determine the most profitable number of Premier Cuisine and Haute Cuisine monthly meal plans to produce. Required:
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