Steele Industries manufactures a number of products at its highly automatedfactory. The products are very popular, with demand far exceeding the factory'scapacity. To maximize profit, management should rank products based on their:gross marginO contribution marginO selling priceO contribution margin per unit of the constrained resource

Limiting factors: All entities are limited in their capacity,either for producing goods or…

Answered: Steele Industries manufactures a number…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 5DQ

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The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?
RelyaTech Corporation manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their selling price gross margin contribution margin per unit of the constrained resource contribution margin
ABC systems get more accurate as more activities are identified and analyzed. Critique the following statement: “A company should look to break its production process into as many activities as possible in order to determine the most accurate unit costs possible”. Why do you agree or disagree with that statement? Give several reasons.
When constrained by a limiting resource, managers often seek to produce those products which have: a)The highest selling prices. b)The lowest average cost per unit. c)The highest contribution margin ratios. d)The highest contribution margin per unit of limiting resource.
Lancelot Group of Companies would like to estimate its cost function for proper cost management across its business lines. The accountant will.most likely segregate the costs on the basis of • A Degree of averaging into total, average, and unit cost O B. Behavior of cost to changes in activity level to unit and fixed cost • C. Degree of averaging into variable and fixed components O D. Cost-volume relationship into variable and fixed components Reser Selection
Management should focus its sales and production efforts on the product or products that will provide the a.lowest product costs b.highest sales revenue c.maximum contribution margin d.lowest direct labor hours
Target costing A target cost is 'a product cost estimate derived by subtracting the desired profit margin from a competitive market price. (CIMA, 2005). Required: The target costing is cost management techniques, and discuss the advantages of using this technique within firms.
In deciding which product lines to emphasize when a production constraint exists, the company should focus on the product line that has the highest a. contribution margin per unit of product. b. contribution margin per unit of the constraint. c. profit per unit of product. d. contribution margin ratio.
Describe how total variable costs and unit variable costs behave with changes in the level of activity. Describe the behavior of (a) total fixed costs and (b) unit fixed costs as the level of activity increases. In applying the high-low method of cost estimation, how is the total fixed cost estimated? An examination of the accounting records of Larredo Company disclosed a high contribution margin ratio and production at a level below maximum capacity. Based on this information, suggest a likely means of improving operating income. If the unit cost of direct materials is decreased, what effect will this change have on the break-even point? What does operating leverage measure, and how is it computed?
When constrained by a limiting resource, managers often seek to produce those products which have: Question options: a)The highest selling prices. b)The lowest average cost per unit. c)The highest contribution margin ratios. d)The highest contribution margin per unit of limiting resource.
In a manufacturing setting, "the best short-term profit maximization approach is to maximize contribution unit times the number of units sold." Discuss the truthfulness of the statement and show by way of examples how you would set about demonstrating the accuracy of such a statement.
In deciding which product lines to emphasize when a production constraint exists, the company should focus on the product line that has the highest contribution margin per unit of product. contribution margin per unit of the constraint. profit per unit of product. contribution margin ratio.

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