Question

Conroy Company manufactures two products-B100 and A200. The company provided the following information with respect to these products: Estimated customer demand (in units) Selling price per unit Variable expenses per unit B100 2,800 $ 1,200 $ 700 A200 2,000 $2,100 $1,200 The company has four manufacturing departments-Fabrication, Molding, Machining, and Assemble & Pack. The capacity available in each department (in hours) and the demands that one unit of each of the company's products makes on those departments is as follows: B100 (hours per unit) A200 (hours per unit) Fabrication Molding Machining Assemble & Pack Capacity (in hours) 4,000 6,000 5,000 4,500 The company is trying to decide what product mix will maximize profits. Given that its fixed costs will not change regardless of the chosen mix, the company plans to identify the product mix that maximizes its total contribution margin.

Answer 1

2. a. The question requires to calculate the department which constrains the production if suppose the Conroy Company focuses solely on producing Product A200. For this we can use the data on hours per unit of each department and total capacity(in hours) of each department.

Thus by dividing the total capacity of each department by the no. of hours per unit of A200, we can find out the maximum output that can be obtained in each department. Please refer the excel screenshot below for the same -

Con = Assignment2 - Microsoft Excel - 0 X Page Layout Formulas Data Review View Developer General - D - 3 AutoSum A Calibri 11 - A A BI U PA Font Home Insert * Cut La Copy Paste Format Painter Clipboard B11 А 1 2. a. Wrap Text 1 Merge & Center - Alignment Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Clear Sort & Find & Filter Select Editing Number Cells E F G H I J K L M N O P Q Conroy Company 2 3 A200 4 5 Fabrication 6 Molding 7 Machining 8 Assemble & pack B100 Capacity Maximum output Hrs per unit Hrs per unit in hrs B100 A200 4000 4000 2000 6000 3000 3000 0 5000 2500 0 4500 1500 Sheet1 Sheet2 Sheet3 Ready OO ^•* 100% @ U - 10:53 ENG 21-03-2020 @ Type here to search .

From the above excel file we can observe that the constraining resource if we consider that only Product A200 is produced is "Assembly & Pack" because it is giving maximum output of 1500 which is the least among the 4 departments.

2. b. Here we have to find out product A200's contribution margin per hour of the constraining resource identified in 2.a. above i.e. "Assemble & Pack" department.

For this first we have to find out the contribution margin per unit of A200 which is nothing but the difference between the Selling Price per unit and Variable Cost per unit. Further to find out the contribution margin per hour of A200 of the "Assemble & Pack" department we have to divide the contribution margin per unit by the no. of hours A200 requires in "Assemble & Pack" department.

The contribution per unit of A200 comes to $900 and contribution per hour of "Assemble & Pack" department comes to $300 as shown in the excel screenshot below -