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Part 1:

Roswell Inc has 6,600 machine hours available each month. The following information on the company's three products is available:

		Product 1		Product 2		Product 3
Contribution margin per unit	$	21.00	$	36.00	$	13.50
Machine hours per unit		3.00		2.00		1.00

If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits?

Product 1 first, product 2 second, and product 3 third.

Product 3 first, product 1 second, and product 2 third.

Product 2 first, product 3 second, and product 1 third.

Product 3 first, product 2 second, and product 1 third.

Part 2:

The Winwood Company manufactures two products: Q and T. The costs and revenues are as follows:

	Product Q		Product T
Sales price	$	164.00	$	102.00
Variable cost per unit		87.00		49.00

Total demand for Product Q is 15,400 units and for Product T is 10,400 units. Machine time is a scarce resource. During the year, 55,400 machine hours are available. Product Q requires 5.00 machine hours per unit, while Product T requires 3.00 machine hours per unit.

How many units of Products Q and T should Winwood produce?

	Product Q	Product T
a.	15,400	0
b.	9,007	4,854
c.	12,200	0
d.	4,840	10,400

c

b

a

d

Part 3:

The following information relates to a product produced by Ashland Company:

Direct materials	$	10.60
Direct labor		7.60
Variable overhead		6.60
Fixed overhead		8.60
Unit cost	$	33.40

Fixed selling costs are $1,600,000 per year. Variable selling costs of $4.60 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Ashland expects to produce only 400,000 units next year. The product normally sells for $46.00 each. A customer has offered to buy 60,600 units for $31.80 each. The customer will pay the transportation charge on the units purchased. If Ashland accepts the special order, the effect on income would be a:

$424,200 increase.

$96,960 increase.

$569,640 decrease.

$145,440 increase.

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