Question

4:37 PM 4:37 PM Question 4 (7 Marks Hce Compuny is manufacing pcial sge ostai peplar podcts (Sall De, and ig is be e pdes ene te A dden hotage of the pla d the podetion process nens he company to redce outp Nw the tie ied on the plastic injection moldng machine is no longer the botneck in he production process Itead the conrains e prodction pes is the qity of plasic w mrial that the company n Which product would now be the mot and least pfblegiven the sew come Rank the 3 prodcts and show your callations Saal Selling prce per un Variahle cost per ani Platic injectin molding machin procesing te reqired to prode o nit $255 S SI0 555 marks 4 mi 24 kg 13 mistes 10g Emins Plantic quastiky rosired par n e k 16kg Reqsired The tetal ime ogid n de platic jo lding mhie is the coi nt production peecess Which pdet weld be the mest and leant poitable s ef the constrain? Rank e 3 practs and shew your calealains a maks) 11

Answer 1

a.

		Small	Deluxe	Big
Selling Price per unit	A	$         180	$            360	$         255
Variable cost per unit	B	$            60	$            100	$            55
Contribution per unit	A - B	$         120	$            260	$         200
Machine time per unit	C	4 minutes	13 minutes	8 minutes
Qty required per unit		24 kg	10 kg	16 kg
Contribution per minute of machine time	(A - B) / C	$            30	$              20	$            25
Rank		1	3	2

b.

		Small	Deluxe	Big
Selling Price per unit	A	$         180	$            360	$         255
Variable cost per unit	B	$            60	$            100	$            55
Contribution per unit	A - B	$         120	$            260	$         200
Qty required per unit	C	24 kg	10 kg	16 kg
Contribution per KG of material	(A - B) / C	$              5	$              26	$      12.50
Rank		3	1	2

c.
Deluxe has the largest unit contribution margin.

d.
The product with the largest unit contribution margin has the largest contribution if we see it as a unit of output. But if we evaluate it as inputs and break it down we find that it takes the maximum machine time per unit. So even though it has the largest unit contribution the same is spread over a larger time to calculate per minute contribution. In case of Qty of plastic material. it consumes the lowest, so here it gives the best ranking.