Appendix B – Profitability Analysis
App B-58
Appendix B – Profitability Analysis
App B-59
62. Tuell LLC is a consulting firm that is considering six projects for the upcoming period.
The six projects under consideration are listed below, along with relevant data.
The managing partner’s time is the constraint in the firm. Only 113 hours of this constrained
resource are available during the upcoming period.
Required:
a. Determine which projects should be accepted for the upcoming period.
b. Determine the total incremental profit for the upcoming period if your plan from part (a)
above is adopted.
Appendix B – Profitability Analysis
Appendix B – Profitability Analysis
App B-61
63. Halama Corporation is considering six jobs for the upcoming period. Those jobs are listed
below, along with relevant data.
The total amount of the constrained resource that is available during the upcoming period is
75 hours.
Required:
a. Determine which jobs should be accepted for the upcoming period.
b. Determine the total incremental profit for the upcoming period if your plan from part (a)
above is adopted.
Appendix B – Profitability Analysis
Appendix B – Profitability Analysis
App B-63
64. Kleppe Corporation has two products that use the same constrained resource—a critical
raw material.
The total amount of the constrained resource available is 10,000 grams.
Required:
a. Which product is most profitable, given the company’s constraint?
b. How much of each product should be produced?
c. What is the total contribution margin if your plan in part (b) above is followed?
d. The company is considering launching a new product whose variable cost is $106 and that
requires 7 grams of the constrained resource. What is the minimum selling price for the new
product?
Appendix B – Profitability Analysis
Appendix B – Profitability Analysis
App B-65
65. The constraint at Frayer Inc. is a key raw material. A total of 9,700 ounces of this
constrained resource are available. Data concerning the company’s two products, Z78 and
D87, appear below:
Each unit of product Z78 requires 5 ounces of the constrained raw material; each unit of
product D87 requires 2 ounces.
Required:
a. In the present circumstances, which product is most profitable?
b. How much of each product should be produced?
c. The company is considering launching a new product whose variable cost is $157 and that
requires 26 ounces of the constrained resource. What is the minimum acceptable selling price
for the new product?
Appendix B – Profitability Analysis
Appendix B – Profitability Analysis
App B-67
66. The constrained resource at Calabria Corporation is a key raw material. A total of 9,900
ounces of the constrained resource are available. Data concerning the company’s two products
follow:
Product S28 requires 2 ounces of the constrained resource; product M16 requires 13 ounces.
Required:
a. Which product is most profitable, given the company’s constraint?
b. How much of each product should be produced?
c. What is the total contribution margin if your plan in part (b) above is followed?
Appendix B – Profitability Analysis
Appendix B – Profitability Analysis
App B-69
67. Fanion Corporation has two products, A33 and U39, that use the same constrained
resource—a critical raw material. Data concerning those products follow:
The total amount of the constrained resource available is 10,100 grams.
Required:
a. Which product is most profitable, given the company’s constraint?
b. How much of each product should be produced?
c. What is the total contribution margin if your plan in part (b) above is followed?
Appendix B – Profitability Analysis
68. Wholey Corporation has designed a new product, I00, whose variable cost is $139.70 per
unit and that requires 7.90 minutes of the constrained resource. The opportunity cost is $51.00
per minute used of the constrained resource.
Required:
What advice would you give to the company concerning the price that should be charged for
the new product I00?
Appendix B – Profitability Analysis
App B-71
69. The management of Kezar Corporation is reviewing its policies concerning compensation
of salespersons. The company has four products that use the same constrained resource. Data
concerning those products appear below:
The company does not have enough of the constrained resource to satisfy for demand of all
four products.
Required:
a. If salespersons are paid commissions that are a set percentage of sales, which product
would they prefer to sell? In other words, if it is a choice between selling one unit of one
product and one unit of another, which product would they prefer to sell?
b. From the standpoint of the entire company, if it is a choice between sales of one unit of one
product versus another, which product should the salespersons emphasize?
Appendix B – Profitability Analysis
70. Reddinger Corporation is about to launch a new product, Z49, whose variable cost is
$143.70 per unit and that would require 5.80 centiliters of a key raw material that is the
company’s constrained resource. The opportunity cost of this raw material is $69.00 per
centiliter used.
Required:
What advice would you give to the company concerning the price that should be charged for
the new product Z49?
Appendix B – Profitability Analysis
App B-73
71. Coltey Corporation has four products that use the same constrained resource. Data
concerning those products appear below:
The company does not have enough of the constrained resource to satisfy for demand of all
four products.
Required:
a. If salespersons are paid commissions that are a set percentage of sales, which product
would they prefer to sell? In other words, if it is a choice between selling one unit of one
product and one unit of another, which product would they prefer to sell?
b. From the standpoint of the entire company, if it is a choice between sales of one unit of one
product versus another, which product should the salespersons emphasize?
Appendix B – Profitability Analysis