Skookum Industries Ltd. manufactures and distributes three types of winter snow management products: Eco Salt, Good Grit

Fantastic news! We've Found the answer you've been seeking!

Question:

Skookum Industries Ltd. manufactures and distributes three types of winter snow management products: Eco Salt, Good Grit and Quick Melt.

It is now December 2020 and you are finalizing the first quarter of 2021 forecast as follows:

	Eco Salt	Good Grit	Quick Melt
Sales (20 kg bag = 1 unit)	25,000	16,000	34,000	units
Sales price	$ 12.00	$ 16.00	$ 9.00	per unit
Direct Materials	$ 20	$ 3.70	$ 4.10	per unit
Conversion costs (variable)	$ 80/MH	$ 80/MH	$ 80/MH
Variable S&A - % of Sales	10%	10%	6%
Fixed S&A	$ 27,000	$ 33,000	$ 23,000	per quarter

Demand for winter snow management products is always strong in the first quarter of each year and as such Skookum's inventory levels are expected to remain at zero during the first quarter of 2021. Despite COVID-19 disruptions, each of the three products has enough direct materials stockpiled for production requirements through to June 2021.

Due to the different processes and components for each of Skookum's three product lines, the number of 20 kg bags produced per hour varies significantly. The direct materials for the Eco Salt production yields only 40 bags per machine hour, Quick Melt yields 50 bags per machine hour and Good Grip yields 60 bags per machine hour. The plant capacity is expected to be 1270 MH or Machine Hours for the first quarter of 2021.

Required:

1) (15 marks) Calculate the number of units (20 kg bags) of each product that Skookum Industries Ltd. should produce in the first quarter of 2021 to maximize profits. Be sure to provide all details of calculations you believe are necessary to prove your results. Note: this part must be fully completed BEFORE attempting part 2) below.

2) (5 marks) It is now early January 2021. A bridge on the only access road to Skookum's production facility was damaged and cannot be fully repaired until the Summer of 2021. As a result, Skookum will now only be able to ship a total of 1,400,000 kg of product in the first quarter of 2021. Based on your answer to part 1) above, what changes, if any, would result from this restriction? Please provide all details of your calculations.