AFM102w2010_March26_POSTED

AFM102w2010_March26_ - AFM 102 Introduction to Managerial Accounting March 26 T-minus 4 Agenda • Last time – Drop or retain – Managing a

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Unformatted text preview: AFM 102: Introduction to Managerial Accounting March 26 T-minus 4... Agenda • Last time: – Drop or retain – Managing a constraint • Today: – Wrap up managing a constraint – NPV and project evaluation • Coming up: more on Ch. 13 • See you Monday Car Art • Is capacity of 7,200 hours enough to meet demand? • Have to choose what should be produce – What do you recommend? Corvette Porsche Ferrari Jaguar Unit CM $100 $64 $70 $144 Yrly Unit Demand 160 240 200 280 Paint Hrs/Unit 10 8 14 16 Car Art • Calculate Profitability Index (CM / Use of constraint) • Give priority to the highest and work down. – 1,600 hours on Corvette – 4,480 hours on Jag – 1,120 hours on Porsche – 0 hours on Ferrari Total CM = $65,280 Corvette Porsche Ferrari Jaguar Unit CM (a) $100 $64 $70 $144 Yrly Unit Demand 160 240 200 280 Paint Hrs/Unit (b) 10 8 14 16 CM/Paint Hr (a/b) $10 $8 $5 $9 Car Art • How much should the company be willing to pay for another hour of paint capacity? – Anything less than $8. – This is because additional capacity should be used for Porsche, which contributes $8/paint hour....
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This note was uploaded on 10/06/2011 for the course AFM 102 taught by Professor R.ducharme during the Fall '09 term at Waterloo.

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AFM102w2010_March26_ - AFM 102 Introduction to Managerial Accounting March 26 T-minus 4 Agenda • Last time – Drop or retain – Managing a

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