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Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners
Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Selling price Variable costs and expenses Machine hours required Economy $39 $21 Product Standard $66 $26 0.8 Deluxe $131 $61 0.5 1.6 Calculate contribution margin per unit. Product Economy Standard Deluxe Contribution margin per unit $
Ignoring the machine time constraint, which single product should Tanek Industries produce? e Textbook and Media What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, e.g. 10.50.) Economy Standard Delu: Contribution margin per limited resource $ $ $ e Textbook and Media If additional machine time could be obtained, how should the additional time be used? The additional time should be used to produce the product e Textbook and Media
Expert Solution
Answer:
1.
| Economy | Standard | Deluxe | |
| Contribution margin per unit | $18 | $40 | $70 |
2.
Ignoring the time constraint, which single product should Tanek Industries produce?
| Deluxe |
3.
| Economy | Standard | Deluxe | |
| Contribution margin per unit of limited resource | $36.00 | $50.00 | $43.75 |
4.
If additional machine time could be obtained, how should the additional time be used?
The additional time should be used to produce
| Standard |
Calculation:
1.
To calculate the Contribution margin per unit, we need to take the selling price and then deduct the variable cost per unit. So here the calculation for Economy, Standard and Deluxe are shown below:
|
Economy |
Standard |
Deluxe |
|
|
Selling price per unit (a) |
$39 |
$66 |
$131 |
|
Variable cost per unit (b) |
($21) |
($26) |
($61) |
|
Contribution margin per unit (c) = (a) - (b) |
$18 |
$40 |
$70 |
2.
Tanek Industries should produce Deluxe model since it has the highest Contribution margin per unit of $70.
3.
Since we have already calculated the Contribution margin per unit, deducting the variable cost per unit from selling price. We need to divide it with the Machine hours required per unit to get the Contribution margin per Machine hour.
|
Economy |
Standard |
Deluxe |
|
|
Selling price per unit (a) |
$39 |
$66 |
$131 |
|
Variable cost per unit (b) |
($21) |
($26) |
($61) |
|
Contribution margin per unit (c) = (a) - (b) |
$18 |
$40 |
$70 |
|
Machine hours required per unit (d) |
0.5 |
0.8 |
1.6 |
|
Contribution margin per Machine hour (c)/(d) |
$36.00 |
$50.00 |
$43.75 |
4.
Tanek Industries should produce Deluxe model since it has the highest Contribution margin per unit of $50.
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