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Hello sir, can you help me with below question?
I’m not sure how to get bottleneck hours amount.
A company manufactures two products, product x and product y using same machines. Sales demand exceeds the machine capacity. Potential sales demand for product x 8000 units and product Y 12000 units. Maximum capacity in the production department is 32000 hours in each period.
product x product y
Sales price 22 27
DM 10 9
DL and Variable OH 6 11
Contribution p.u 6 7
Machine hours p.u 1.5 hours 2 hours
Fixed costs in each period are $90,000.00.
(a) Using marginal costing principles, calculate the profit maximizing output in each period, and calculate the amount of profit.
The question as you have typed it is not a question on throughput accounting at all.
It says ‘using marginal costing principles’, which means to use normal key factor analysis (which I explain in my free lectures on throughput accounting – I do an example first using key factor analysis, and then afterwards using throughput accounting).
So it is not a question of finding bottleneck hours, but the limit on hours is certainly needed and is given in the question as being 32,000 hours.