Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small

Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $85,000 for the company as a whole. In addition, the following information is available about the three products:


Large Medium Small
Unit selling price $184 $160 $100
Unit variable cost 130 120 76
Unit contribution margin $ 54 $ 40 $ 24
Autoclave hours per unit 3 2 1
Total process hours per unit 5 4 2
Budgeted units of production 3,000 3,000 3,000




a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

b. Prepare an analysis showing which product is the most profitable per bottleneck hour.


Answer:

a. 
Large 
Medium 
Small 
Total 
Units produced………………………… 3,000 3,000 3,000  
Revenues……………………………… $552,000 $480,000 $300,000 $1,332,000 
Less variable costs……………………   390,000   360,000   228,000   978,000 
Contribution margin………………… $162,000 $120,000 $ 72,000 $  354,000 
Less fixed costs………………………       85,000 
Income from operations………………     $  269,000 
b. The Small glass product is the most profitable in a bottleneck operation, 
demonstrated as follows: 
 Large Medium Small 
Contribution margin…………………………………… $54 $40 $24 
÷ Autoclave hours per unit……………………………     3     2     1 
Unit contribution margin per production    
bottleneck hour……………………………………… $18 $20 $24