Requirement 1. Which product should

Containers Plus

emphasize? Why?

Complete the product mix analysis to determine the contribution margin per machine hour.

Containers Plus
Product Mix Analysis
	Regular		Large
Sales price per unit		$9.00		$10.90
Variable cost per unit		3.10		4.70
Contribution margin per unit		5.90		6.20
Units per machine hour		15		11
Contribution margin per machine hour		$88.50		$68.20

Which product should

Containers Plus

emphasize? Why?

Containers Plus

should emphasize the production of

regular bins

because this product has the higher

contribution margin per machine hour.

Requirement 2. To maximize profits, how many of each size bin should

Containers Plus

produce? (Enter a "0" for any zero amounts.)

Containers Plus should spend		3,300	machine hours making	49,500	regular size bins, and	0
machine hours making	0	large size bins.

Requirement 3. Given this product mix, what will the company's operating income be?

Number of regular size bins per period		3300
Contribution margin per regular size bin
Total contribution margin
Fixed costs
Operating income

The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high that

Containers Plus can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for

3,300hours per period.Containers Plus can produce 11 large bins every hour, whereas it can produce15

regular bins in the same amount of time. Fixed costs amount to $125,000 per period.

	Regular	Large
Sales price per unit	$9.00	$10.90
Variable costs per unit	3.10	4.70

1.	Which product should Containers Plus emphasize? Why?
2.	To maximize profits, how many of each size bin should Containers Plus produce?
3.	this product mix, what will the company's operating income be?