Question

Sammamish Brick, Inc., manufactures bricks using clay deposits on the company's property. Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks are then stacked onto movable metal platforms and rolled into the kiln where the are fired until dry. The dried bricks are then packa ged and shipped to retail outlets and contractors. The bottleneck in the production process is the kiln, which is available for 3,325 hours per year. Data concerning the company's four main products appear below. Products are sold by the pallet. MAONICA Gross revenue per pallet Contribution margin per pallet Annual demand (pallets) Hours required in the kiln per pallet Traditional Brick $945 $590 125 Textured Facing $1,504 $ 700 145 10 Cinder Block $812 $480 135 Roman Brick $1,115 $570 185 10 No fixed costs could be avoided by modifying how much is produced of any product. Required: 1a. Calculate the total hours required in the kiln to satisfy demand for all products. Total Traditional Brick Textured Facing Cinder Block Roman Brick Total hours required in the drying kiln

Answer 1

1a.

	Traditional	Textured	Cinder	Roman	Total
	Brick	Facing	Block	Brick
Annual demand in pallets	125	145	135	185
Hours required in the drying kiln per pallet	10	10	4	5
Total hours required in the drying kiln	1250	1450	540	925	4165

1b. No

There isn't sufficient capacity in the kiln since 4165 hours are required in the kiln to satisfy the demand while only 3325 hours are available.

2a.

	Traditional	Textured	Cinder	Roman
	Brick	Facing	Block	Brick
Contribution margin per pallet	590	700	480	570
Hours required in the drying kiln per pallet	10	10	4	5
Profitability index	59	70	120	114

2b.

Cinder Block	135	pallets
Roman Brick	185	pallets
Textured Facing	145	pallets
Traditional Brick*	41	pallets

*Based on the profitability index, the products will be produced starting from product with the highest profitability index progressing to the ones with the lower profitability index. Thus, Cinder Block, followed by Roman Brick, and Textured Facing will be produced first and the remaining drying kiln hours available will then be utilized for manufacturing Traditional Brick which has the lowest profitability index.

Number of pallets of Traditional Brick produced = Remaining hours/Hours required in drying kiln per pallet = [3325 - (540 + 925 + 1450)]/10 = 410/10 = 41 pallets.

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