Solution-Problem - Product Decisions under Bottlenecked

Problem - Product Decisions under Bottlenecked Operations

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Reference no: EM132687496

Problem - Product Decisions under Bottlenecked Operations

Eagle Alloys Inc. has three grades of metal product, Type 5, Type 10, and Type 20. Financial data for the three grades are as follows:

	Type 5	Type 10	Type 20
Revenues	$39,000	$41,000	$26,500
Variable cost	$25,000	$20,500	$13,500
Fixed cost	8,000	8,000	8,000
Total cost	$33,000	$28,500	$21,500
Income from operations	$ 6,000	$12,500	$ 5,000
Number of units	÷ 5,000	÷ 5,000	÷ 5,000
Income from operations per unit	$ 1.20	$ 1.20	$ 1.00

Eagle's operations require all three grades to be melted in a furnace before being formed. The furnace runs 24 hours a day, 7 days a week, and is a production bottleneck. The furnace hours required per unit of each product are as follows:

Type 5: 5 hours

Type 10: 10 hours

Type 20: 5 hours

The Marketing Department is considering a new marketing and sales campaign.

Required - Which product should be emphasized in the marketing and sales campaign in order to maximize profitability?

Reference no: EM132687496

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Problem - Product Decisions under Bottlenecked Operations

Reference no: EM132687496

Reference no: EM132687496

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