[LO 13-3] b. If there is a constraint, reduce the demand on the constraint so that the restaurant is at full capacity City. What is the amount of needed capacity for each constraint? If there is a constraint for any of (assume some customers would have to be turned away). Calculate the expected total throughput margin for the restaurant per hour, day, and month (assuming a 26-day month). 3. Taylor has obtained construction estimates. To increase the capacity of the bar to 80 seats, the dining room to 120 seats, and the kitchen to 25 meals at the same time would cost $250,000, which Taylor could finance for $5,000 per month for the next 4 years. There would be no change to the parking lot. Given your analysis above, prepare a brief recommendation to Taylor regarding expanding the restaurant. 13-48 Life-Cycle Costing Kate Stephens, the COO of BioDerm, has asked her cost management team for a product-line profitability analysis for her firm's two products, Xderm and Yderm. The two skin care products require a large amount of research and development and advertising. After receiving the following statement from BioDerm's accountants, Kate concludes that Xderm is the more profit- able product and that perhaps cost-cutting measures should be applied to Yderm: Xderm Yderm Sales Cost of goods sold $2,900,000 (2,000,000) $2,000,000 (1,500,000) Gross profit $ 900,000 $ 500,000 Research and development Selling expenses Profit before taxes Total $ 4,900,000 (3,500,000) $1,400,000 (800,000) (100,000) $ 500,000 566 Part Two Planning and Decision Making Required 1. Explain why Kate may be wrong in her assessment of the relative performance of the two products 2. Suppose that 75% of the R&D and selling expenses are traceable to Xderm. Using this assumpi compute the life-cycle income for each product and the return on sales for each product. 3. Consider your answers to requirements I and 2 with the following additional information: R&D and sell ing expenses are substantially higher for Xderm because it is a new product. Kate has strongly supponel development of the new product, including the high selling and R&D expenses. She has assured senior managers that the Xderm investment will pay off in improved profits for the firm. What are the ethical issues, if any, facing Kate as she reports to top management on the profitability of the firm's two produc [LO 13-3) 13-49 Life-Cycle Costing; Health Care; Present Values Forever Young Inc. has developed a drug dut will diminish the effects of aging. Forever Young has spent $1,000,000 on research and developme and $2,108,000 for clinical trials. Once the drug is approved by the FDA. which is imminent, it will have a 5-year sales life cycle. Laura Russell, Forever Young's chief financial officer, must determi the best alternative for the company among three options. The company can choose to manufacture package, and distribute the drug, outsource only the manufacturing; or sell the drug's patent. Laura compiled the following annual en information for this