Blossom Innovations, Inc. produces exercise and fitness gear. Two of its newer p
ID: 2566759 • Letter: B
Question
Blossom Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this purpose. The machines have a maximum capacity of 6,000 machine hours, and no other products that the company makes use these machines.
Sarah Jacob, the company’s operations manager, is preparing the production schedule for the coming month and can’t seem to find enough machine time to produce enough units to meet the customer demand that the marketing department has included in the sales budget.
Michael Stoner, the company’s controller, has gathered the following information about the two products:
Machine hours per unit
1. Calculate the total number of machine hours needed to produce enough units to meet the sales demand for the two products.
2. How should Sarah allocate the 6,000 available machine hours between the two products so that Blossom maximizes its profits? Wight bench hours and dumbell rack hours?
3. What total contribution margin will Blossom realize based on your answer to part (b)?
4. Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $68 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,780 units. How should Sarah allocate the 6,000 machine hours based on this new information?
5. Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $68 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,780 units. What total contribution margin will Blossom earn?
6. After hearing about Sarah’s recommendation to increase the weight bench price to $68, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $59, demand will fall to 2,640 units. How should Sarah allocate the 6,000 machine hours under Scott’s proposal?
7. After hearing about Sarah’s recommendation to increase the weight bench price to $68, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $59, demand will fall to 2,640 units. What total contribution margin will Blossom earn?
0.8
Rack Weight
Bench Selling price per unit $53 $60 Direct materials 22 15 Direct labor 5 8 Variable overhead 3 6 Fixed overhead 5 10 Profit per unit $18 $21 Unit sales demand 4,000 7,000
Machine hours per unit
1. Calculate the total number of machine hours needed to produce enough units to meet the sales demand for the two products.
2. How should Sarah allocate the 6,000 available machine hours between the two products so that Blossom maximizes its profits? Wight bench hours and dumbell rack hours?
3. What total contribution margin will Blossom realize based on your answer to part (b)?
4. Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $68 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,780 units. How should Sarah allocate the 6,000 machine hours based on this new information?
5. Sarah has talked with the marketing department about the situation and suggested that the company raise the sales price on the weight bench to $68 to reduce customer demand. The marketing department believes that at the higher price, demand for the weight bench will drop to 5,780 units. What total contribution margin will Blossom earn?
6. After hearing about Sarah’s recommendation to increase the weight bench price to $68, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $59, demand will fall to 2,640 units. How should Sarah allocate the 6,000 machine hours under Scott’s proposal?
7. After hearing about Sarah’s recommendation to increase the weight bench price to $68, Scott Wilson, the sales manager, suggested that the company raise the price of the dumbbell rack instead. He believes that if the price is increased to $59, demand will fall to 2,640 units. What total contribution margin will Blossom earn?
0.50.8
Explanation / Answer
1. Total number of machine hours needed to produce enough units to meet the sales demand for the two products
= 5600 hours
2.
Statement of contribution per machine hour
Statement of allocation of machine hours
3.
total contribution margin will Blossom realize = $247000
4.
Statement of contribution per machine hour
Statement of allocation of machine hours
5.
total contribution margin will Blossom realize = $288716
6.
Statement of contribution per machine hour
Statement of allocation of machine hours
7.
total contribution margin will Blossom realize = $257910
DumbbellRack Weight
Bench Unit sales demand 4000 7000 Machine hours per unit 0.5 0.8 Machine hours needed 2000 5600