Question

1. Product Decisions Under Bottlenecked Operations

   Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown 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 A condition that occurs when product demand exceeds production capacity.production bottleneck. Total fixed costs are $200,000 for the company as a whole. In addition, the following information is available about the three products:

   	Large		Medium		Small
   Unit selling price	$94		$281		$232
   Unit variable cost	74		230		204
   Unit contribution margin	$ 20		$ 51		$ 28
   Autoclave hours per unit	2		6		4
   Total process hours per unit	6		12		8
   Budgeted units of production	4,500		4,500		4,500

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

   	Large	Medium	Small	Total
   Units produced
   Revenues	$	$	$	$
   Variable costs
   Contribution margin	$	$	$	$
   Fixed costs
   Income from operations				$

   b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent.

   	Large	Medium	Small
   Contribution margin	$	$	$
   Autoclave hours per unit
   Unit contribution margin per production bottleneck hour	$	$	$

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Answer 1

Particulars	Large	Medium	Small	Total
Units produced	4500	4500	4500	13500
Revenues	423000	1264500	1044000	2731500
Less: Variable costs	333000	1035000	918000	2286000
Contribution margin	90000	229500	126000	445500
Less: Fixed costs				200,000
Income from operations				245,500

Particulars	Large	Medium	Small
Contribution margin	20	51	28
Autoclave hours per unit	2	6	4
Unit contribution margin per production bottleneck hour	10	8.5	7

Working notes for the above answer is as under