StoreAway produces plastic storage bins for household storage needs. Sales price

Question

StoreAway produces plastic storage bins for household storage needs. Sales prices and variable costs are as follows: EEB (Click the icon to view the costs.) (Click the icon to view additional information.) Recsad the: requirements. Requirement 1. Which product should StoreAway emphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour. StoreAway Product Mix Analysis Regular Large Sales price per unit Variable cost per unit Contribution margin per unit Units per machine hour Contribution margin per machine hour Which product should StoreAway emphasize? Why? StoreAway should emphasize the production of Vbecause this product has the higher

Explanation / Answer

Requirement 1 Regular Large Sales price per unit (A) 8 10.6 Variable cost per unit (B) 3.5 4.5 Contribution margin per unit (A-B) = C 4.5 6.1 Units per machine hours (D) 15 9 Contribution margin per machine hour (C*D) 67.50 54.90 Storeway should emphasize on Regular Bins because the product has the higher contribution per hour than Large Bins Requirement 2 Since Contribution margin per machine hour of regular is high and its demand is not limited Storeway should spend its full machine hours for Regular 2800 Hours Making regular size bins 42000 Bins Storeway should spend its machine hours for Large 0 Making Large size bins 0 Requirement 3 Number of regular size bins (A)             42,000 Contribution margin/regular Bins   (B)                                                        5 Total contribution margin (A*B)= C          1,89,000 Fixed Cost (D)          1,20,000 Opearting Income (C-D)             69,000

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