Ensign should emphasize product 2 because it

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Ensign should emphasize Product 2 because it generates a contribution margin of $30 per minute of the constrained resource relative to $24 per minute for Product 1.Ensign should emphasize Product 2 because it generates a contribution margin of $30 per minute of the constrained resource relative to $24 per minute for Product 1.MANAGEMENT ACCOUNTING 162Product12Contribution margin per unit$ 24 $ 15 Time required to produce one unit÷1.00min. ÷0.50min.Contribution margin per minute24$ 30$
Utilization of a Constrained ResourceThe key is the contribution margin per unit of the constrained resource.Ensign can maximize its contribution margin by first producing Product 2 to meet customer demand and then using any remaining capacity to produce Product 1. The calculations would be performed as follows.Ensign can maximize its contribution margin by first producing Product 2 to meet customer demand and then using any remaining capacity to produce Product 1. The calculations would be performed as follows.MANAGEMENT ACCOUNTING 163Product12Contribution margin per unit$ 24 $ 15 Time required to produce one unit÷1.00min. ÷0.50min.Contribution margin per minute24$ 30$
Utilization of a Constrained ResourceLet’s see how this plan would work.64Alloting Our Constrained Resource (Machine A1)Weekly demand for Product 22,200 unitsTime required per unit×0.50min.Total time required to make Product 21,100min.
Utilization of a Constrained ResourceLet’s see how this plan would work.MANAGEMENT ACCOUNTING 165Alloting Our Constrained Resource (Machine A1)Weekly demand for Product 22,200 unitsTime required per unit×0.50min.Total time required to make Product 21,100min.Total time available2,400min.Time used to make Product 21,100min.Time available for Product 11,300min.
Utilization of a Constrained ResourceLet’s see how this plan would work.MANAGEMENT ACCOUNTING 166Alloting Our Constrained Resource (Machine A1)Weekly demand for Product 22,200 unitsTime required per unit×0.50min.Total time required to make Product 21,100min.Total time available2,400min.Time used to make Product 21,100min.Time available for Product 11,300min.Time required per unit÷1.00min.Production of Product 11,300units
Utilization of a Constrained ResourceAccording to the plan, we will produce 2,200 units of Product 2 and 1,300 of Product 1. Our contribution margin looks like this.The total contribution margin for Ensign is $64,200.The total contribution margin for Ensign is $64,200.MANAGEMENT ACCOUNTING 167Product 1Product 2Production and sales (units)1,300 2,200 Contribution margin per unit24$ 15$ Total contribution margin31,200$ 33,000$
Quick Check Colonial Heritage makes reproduction colonial furniture from select hardwoods.The company’s supplier of hardwood will only be able to supply 2,000 board feet this month. Is this enough hardwood to satisfy demand?a. Yesb. NoMANAGEMENT ACCOUNTING 168Chairs Tables Selling price per unit $80 $400 Variable cost per unit $30 $200 Board feet per unit 2 10 Monthly demand 600 100
Quick Check Colonial Heritage makes reproduction colonial furniture from select hardwoods.

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