Gannett Glass Company manufactures three types of safety plate glass: large,medium,and small. All these products have high demand. Thus, Gannett Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $550,000. In addition, the following information is available about the three products:
Large Medium Small
Unit selling price $240 $180 $120
Unit variable cost 126 80 68
Unit contribution margin $114 $100 $ 52
Autoclave hours per unit 6 10 4
total process hours per unit 20 16 12
budgeted units of production 2,500 2,500 2,500
a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.
b. Prepare an analysis showing which product is the most profitable per bottleneck hour.