Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $10 per process hour. The fixed cost is $513,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 3,000 3,000 3,000 Total process hours per unit 15 13 10 Furnace hours per unit Unit selling price $299 $247 $264 Direct materials cost per unit $113 $105 $99 The furnace operation is part of the total process for each of these three products. Thus, for example, 4 of the 15 hours required to process High Grade steel are associated with the furnace. 1. Determine the unit contribution margin for each product. If required, round your answers to two decimal places. Contribution Margin Per Unit High Grade $ 166 x Good Grade %$4 142 x Regular Grade %$4 165 X
Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $10 per process hour. The fixed cost is $513,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 3,000 3,000 3,000 Total process hours per unit 15 13 10 Furnace hours per unit Unit selling price $299 $247 $264 Direct materials cost per unit $113 $105 $99 The furnace operation is part of the total process for each of these three products. Thus, for example, 4 of the 15 hours required to process High Grade steel are associated with the furnace. 1. Determine the unit contribution margin for each product. If required, round your answers to two decimal places. Contribution Margin Per Unit High Grade $ 166 x Good Grade %$4 142 x Regular Grade %$4 165 X
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 7E: High-low method Ziegler Inc. has decided to use the high-low method to estimate the total cost and...
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