Question

In: Accounting

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX...

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,910 units of Product TLX and 2,085 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.

$ per unit Product TLX Product MTV
Selling price per unit $ 13.50 $ 8.10
Variable costs per unit 4.05 4.86


Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.)

Product TLX Product MTV
Contribution margin per unit
Contribution margin per production hour
Product TLX Product MTV Total
Maximum number of units to be sold 3,910 2,085
Hours required to produce maximum units
For Most Profitable Sales Mix Product TLX Product MTV Total
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin

Solutions

Expert Solution

Answer:

Product TLX Product MTV
Contribution margin per unit $          9.45 $            3.24
Contribution margin per production hour $          4.73 $            0.65
Product TLX Product MTV Total
Maximum number of units to be sold 3,910 2,085
Hours required to produce maximum units       7,820.00      10,425.00     18,245.00
For Most Profitable Sales Mix Product TLX Product MTV Total
Hours dedicated to the production of each product       2,300.00                    -         2,300.00
Units produced for most profitable sales mix       1,150.00                    -         1,150.00
Contribution margin per unit $          9.45 $                -  
Total contribution margin $ 10,867.50 $                -   $ 10,867.50

Note:

Product TLX Product MTV
Selling price $       13.50 $            8.10
Variable Cost $          4.05 $            4.86
Contribution per unit $          9.45 $            3.24
Number of hours per unit              2.00                5.00
Contribution per hour $          4.73 $            0.65

In case of any doubt, please comment.


Related Solutions

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,200 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,740 units of Product TLX and 5,165 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,400 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,080 units of Product TLX and 1,850 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,910 units of Product TLX and 1,680 units of Product MTV. Selling prices and variable costs per unit to...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX...
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,100 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,570 units of Product TLX and 4,080 units of Product MTV. Selling prices and variable costs per unit to...
Daston Company manufactures two products, Product F and Product G. The company expects to produce and...
Daston Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,910 units of Product F and 2,430 units of Product G during the current year. Data relating to the company’s three activity cost pools are given below for the current year: Total Activity Activity Cost Pools Total Cost Product F Product G Total Machine setups $ 35,682 160 setups 153 setups 313 setups Purchase orders $ 248,880 950 orders 1,490 orders 2,440 orders...
Dace Company manufactures two products, Product F and Product G. The company expects to produce and...
Dace Company manufactures two products, Product F and Product G. The company expects to produce and sell 3,200 units of Product F and 2,100 units of Product G during the current year. Data relating to the company's three activity cost pools are given below for the current year: Total Activity Activity Cost Pool Total Cost Product F Product G Total Machine setups $ 6,300 150 setups 150 setups 300 setups Purchase orders $ 53,320 530 orders 1,190 orders 1,720 orders...
Daba Company manufactures two products, Product F and Product G. The company expects to produce and...
Daba Company manufactures two products, Product F and Product G. The company expects to produce and sell 2,700 units of Product F and 3,100 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year: Estimated Expected Activity Activity Cost Pool Overhead Cost Product F Product G Total Machine setups $ 15,800 120 setups...
Cooke Company manufactures two products, Product F and Product G. The company expects to produce and...
Cooke Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,400 units of Product F and 1,800 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Below are current year data for the company's three activity cost pools. Total Activity Activity Cost Pool Total Cost Product F Product G Total Machine setups $ 10,800 80 setups 100 setups 180 setups Purchase...
Easecom Company is a manufacturer of highly specialized products for networking video-conferencing equipment. Production of specialized...
Easecom Company is a manufacturer of highly specialized products for networking video-conferencing equipment. Production of specialized units is, to a large extent, performed under contract, with standard units manufactured to marketing projections. Maintenance of customer equipment is an important area of customer satisfaction. With the recent downturn in the computer industry, the video-conferencing equipment segment has suffered, causing a slide in Easecom’s performance. Easecom’s income statement for the fiscal year ended October 31, Year 1, is presented below. Easecom Company...
Edgerron Company is able to produce two products, G and B, with the same machine in...
Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available. Product G Product B Selling price per unit $ 240 $ 270 Variable costs per unit 105 162 Contribution margin per unit $ 135 $ 108 Machine hours to produce 1 unit 0.4 hours 1.0 hours Maximum unit sales per month 650 units 250 units The company presently operates the machine for a single eight-hour shift for...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT