Four products are manufactured by MNO: maxi midi mini micro Selling price per unit 600 400...

Four products are manufactured by MNO:

maxi midi mini micro

Selling price per unit 600 400 300 250

variable labor cost per unit(40$/hour) 250 120 140 90

variable material cost per unit 275 250 100 110

Part 1: Each of the four products takes two production hours. Assuming production hours as the overall capacity constraint, the ranking order of products for MNO to maximize its profitability is:

a. maxi, midi, mini , micro

b. maxi, mini, micro, midi

c. micro, mini, maxi , midi

d. micro, midi, maxi, mini

Applying the theory of constrains and a throughput accounting approach, and assuming labor to be the bottleneck constraint, the ranking order of products for MNO to maximize its profitability within the labor constraint is:

a. maxi,midi,mini, micro

b. micro, mini, maxi, midi

c. maxi, mini, micro, midi

d. micro, midi, maxi, mini

Solutions

Expert Solution

Part 1

	Maxi	Midi	Mini	Micro
Selling Price per unit	$ 600.00	$ 400.00	$ 300.00	$ 250.00
Variable Labor cost per unit	$ 250.00	$ 120.00	$ 140.00	$ 90.00
Variable Material cost per unit	$ 275.00	$ 250.00	$ 100.00	$ 110.00
Contribution Margin per unit	$ 75.00	$ 30.00	$ 60.00	$ 50.00
Production hours per unit	2	2	2	2
Contribution Margin per production hour	$ 37.50	$ 15.00	$ 30.00	$ 25.00
Rank	1	4	2	3

Answer is b. maxi, mini, micro, midi

Part 2

	Maxi	Midi	Mini	Micro
Selling Price per unit	$ 600.00	$ 400.00	$ 300.00	$ 250.00
Variable Labor cost per unit	$ 250.00	$ 120.00	$ 140.00	$ 90.00
Variable Material cost per unit	$ 275.00	$ 250.00	$ 100.00	$ 110.00
Contribution Margin per unit	$ 75.00	$ 30.00	$ 60.00	$ 50.00
Labor hours per unit	6.25	3	3.5	2.25
Contribution Margin per labor hour	$ 12.00	$ 10.00	$ 17.14	$ 22.22
Rank	3	4	2	1

Answer is b. micro, mini, maxi, midi

ekkarill92 answered 2 years ago

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