Table 5.1 A Company Makes Four Products That Have the Following Characteristics

question 127

Multiple Choice

Table 5.1
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce; Product B sells for $75 but needs $30 of materials and $15 of labor to produce; Product C sells for $100 but needs $50 of materials and $30 of labor to produce; Product D sells for $150 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table.

Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.1. Using the bottleneck method, in what sequence should products be scheduled for production?

• A) D, C, B, A
• B) D, C, A, B
• C) C, D, A, B
• D) C, D, B, A

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Definitions:

Transfer Price

The price at which goods and services are transferred between departments or related entities within the same organization.

Variable Costs

Costs that vary directly with the level of production or business activity, such as materials and labor costs.

Allocated Fixed Costs

Fixed costs that are distributed across different departments or projects based on determined criteria.

Income From Operations

Earnings generated from the normal business activities of a company, excluding income from other sources like investments.