Question

Braun’s Brakes manufactures two different types of brake pads: Standard and Premium. Weekly demand is estimated to be 100 units of the Standard model and 70 units of the Premium model. Production is constrained by the number of machine hours available to create brake pads; only 496 machine hours are available per week. The following per unit data apply:

	Standard	Premium
Selling price	$42.00	$58.00
Direct materials	$6.00	$12.00
Direct labor	$12.00	$18.00
Variable support costs	$6.00	$8.00
Machine hours required	3	4

1. Assume for a moment no constraint exists for Braun’s Brakes and that as many brake pads of each type – Standard and Premium – can be produced as desired/needed. Which product line would Braun’s Brakes emphasize – attempt to produce and sell as many as possible of – for purposes of production and sale?

a. Premium, because it has a contribution margin of $20 per unit, while Standard has a contribution margin per unit of just $18.

b. Premium, because it has the higher selling price of the two.

c. Standard, because it has total variable costs per unit of just $24, while Premium has total variable costs per unit of $38.

d. Standard, because it has a contribution margin of $6 per machine hour, while Premium has a contribution margin per machine hour of just $5.

2. Disregarding our assumption in the immediately preceding question, and recognizing that a production constraint does, in-fact, exist for Braun’s Brakes, which product line will Braun’s Brakes emphasize – attempt to produce and sell as many as possible of – for purposes of production and sale?

a. Standard, because it has a contribution margin of $6 per machine hour, while Premium has a contribution margin per machine hour of just $5.

b. Premium, because it has the higher selling price of the two.

c. Premium, because it has a contribution margin of $20 per unit, while Standard has a contribution margin per unit of just $18.

d. Standard, because it has total variable costs per unit of just $24, while Premium has total variable costs per unit of $38.

3. Regardless of your answer in the immediately preceding question, assume Braun’s Brakes determines that they should emphasize Standard brake pads – attempt to produce and sell as many Standard brake pads as possible, with remaining machine hours used to produce and sell Premium brake pads – given their production constraint of machine hours. How many brake pads of each model should be produced each week given their product emphasis decision and the total available machine hours of 496 per week?

a. Standard = 100 and Premium = 70

b. Standard = 93 and Premium = 63

c. Standard = 100 and Premium = 49

d. Standard = 72 and Premium = 70

Answer 1