Home / Questions / Sales Mix Decision P 4 Management at Generic Chemical Company is evaluating its product m...
Sales Mix Decision
P 4. Management at Generic Chemical Company is evaluating its product mix in an attempt to maximize profits. For the past two years, Generic has produced four products, and all have large markets in which to expand market share. Heinz Bexer, Generic’s controller, has gathered data from current operations and wants you to analyze them for him. Sales and operating data are as follows:
|
Product AZ1 |
Product BY7 |
Product CX5 |
Product DW9 |
|
|
Variable production costs |
$71,000 |
$91,000 |
$91,920 |
$97,440 |
|
Variable selling costs |
$10,200 |
$5,400 |
$12,480 |
$30,160 |
|
Fixed production costs |
$20,400 |
$21,600 |
$29,120 |
$18,480 |
|
Fixed administrative costs |
$3,400 |
$5,400 |
$6,240 |
$10,080 |
|
Total sales |
$122,000 |
$136,000 |
$156,400 |
$161,200 |
|
Units produced and sold |
85,000 |
45,000 |
26,000 |
14,000 |
|
Machine hours used* |
17,000 |
18,000 |
20,800 |
16,800 |
Required
1. Compute the machine hours needed to produce one unit of each product.
2. Determine the contribution margin per machine hour for each product.
3. Which product line(s) should be targeted for market share expansion?
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