Create data-driven innovative process improvements/solutions to support decision making. Assignment: Overview: Make a decision about the...

 

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Create data-driven innovative process improvements/solutions to support decision making. Assignment: Overview: Make a decision about the most profitable use of a scarce resource. Specific Task: Cannon Corp manufactures three products-X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product follow: Selling price Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio $ $ X 180 24 102 126 54 30% $ Product Y 270 80 90 170 100 37 % $ $ Z 240 32 148 180 60 25 % The same raw material is used in all three products. Cannon Corp has only 6,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assume that Cannon has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 3. Assuming that Cannon's estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 4. A foreign supplier could furnish Cannon with additional stocks of the raw material at a substantial premium over the usual price. Assuming Cannon's estimated customer demand is 500 units per product line and that the company has used its 6,000 pounds of raw material in an optimal fashion, what is the highest price Cannon Company should be willing to pay for an additional pound of materials? Create data-driven innovative process improvements/solutions to support decision making. Assignment: Overview: Make a decision about the most profitable use of a scarce resource. Specific Task: Cannon Corp manufactures three products-X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product follow: Selling price Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio $ $ X 180 24 102 126 54 30% $ Product Y 270 80 90 170 100 37 % $ $ Z 240 32 148 180 60 25 % The same raw material is used in all three products. Cannon Corp has only 6,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assume that Cannon has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 3. Assuming that Cannon's estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 4. A foreign supplier could furnish Cannon with additional stocks of the raw material at a substantial premium over the usual price. Assuming Cannon's estimated customer demand is 500 units per product line and that the company has used its 6,000 pounds of raw material in an optimal fashion, what is the highest price Cannon Company should be willing to pay for an additional pound of materials?

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