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Gannett Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Gannett Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $550,000. In addition, the following information is available about the three products:

Large: Unit selling price $240, Unit variable cost 126, unit contribution margin $114
Medium: Unit selling price $180 Unit variable cost 80, unit contribution margin $100
Small: Unit selling price $120, Unit variable cost 68, unit contribution margin $52

Large: Autoclave hours per unit 6, Total process hours per unit 20, Budgeted units of production 2,500
Medium: Autoclave hours per unit 10, Total process hours per unit 16, Budgeted units of production 2,500
Small: Autoclave hours per unit 4, Total process hours per unit 12, Budgeted units of production 2,500

a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

b. Prepare an analysis showing which product is the most profitable per bottleneck hour.

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  • Category:- Accounting Basics
  • Reference No.:- M938341

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