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  • Product mix analysis and contribution per unit for HV, MV and LV products

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    1. The document analyzes the contribution per unit and machine hour of Products HV, MV, and LV. It considers different product mix scenarios based on limiting factors like machine capacity, labor, materials, and outsourcing. 2. If MV is dropped, profits would decrease by Rs. 1,740,000. The previous year's loss would have been Rs. 1,750,000. 3. If machine capacity is limiting, producing 30,000 HV and 6,000 MV units using 90,000 and 12,000 machine hours respectively would yield a profit of Rs. 3,461,000.

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    1. The document analyzes the contribution per unit and machine hour of Products HV, MV, and LV. It considers different product mix scenarios based on limiting factors like machine capacity, labor, materials, and outsourcing. 2. If MV is dropped, profits would decrease by Rs. 1,740,000. The previous year's loss would have been Rs. 1,750,000. 3. If machine capacity is limiting, producing 30,000 HV and 6,000 MV units using 90,000 and 12,000 machine hours respectively would yield a profit of Rs. 3,461,000.

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    21 views9 pages

    Product mix analysis and contribution per unit for HV, MV and LV products

    Uploaded by

    Aviral
    1. The document analyzes the contribution per unit and machine hour of Products HV, MV, and LV. It considers different product mix scenarios based on limiting factors like machine capacity, labor, materials, and outsourcing. 2. If MV is dropped, profits would decrease by Rs. 1,740,000. The previous year's loss would have been Rs. 1,750,000. 3. If machine capacity is limiting, producing 30,000 HV and 6,000 MV units using 90,000 and 12,000 machine hours respectively would yield a profit of Rs. 3,461,000.

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    of 9

    Contribution per unit

    Pdt HV Pdt MV
    Sales 360 210
    Less: variable expenses
    Direct material 62 44
    Direct Labor 80 40
    Variable Manufacturing OH 90 60
    Shipping expenses 20 252 8 152
    Contribution per unit 108 58

    Contribution Margin Ratio 30 27.619048

    1 If the Product MV is dropped the profits would decrease by Rs. 1740000


    Or the loss for the previous year would have been Rs. 1750000

    Machine hours 3 2
    Contribution per machine hour 36 29

    Product mix of the last year Pdt HV Pdt MV


    Units 24000 30000
    Total machine hours 72000 60000

    Total contribution 2592000 1740000


    Less :Fixed expenses
    Manufacturing overhead
    Selling and adminexpenses
    Profit before Int and tax
    Less :Interest
    Profit before tax

    Shipping expenses 480000 240000


    3 New product mix if machine capacity is the limiting factor
    Pdt HV Pdt MV
    Units 30000 6000
    Total machine hours 90000 12000

    Total contribution 3240000 348000


    Less :Fixed expenses
    Manufacturing overhead
    Selling and adminexpenses
    Profit before Int and tax
    Less :Interest
    Profit before tax

    Pdt HV Pdt MV
    Current Production Units 24000 30000
    Total Labour hours 48000 30000

    4 New product mix if labour resource is the limiting factor


    Contribution per labor rupee 1.35 1.45
    contribution per labor hour 54 58

    units 30000 45000


    Total Labour hours 60000 45000

    Total contribution 3240000 2610000


    Less :Fixed expenses
    Manufacturing overhead
    Selling and adminexpenses
    Profit before Int and tax
    Less :Interest
    Profit before tax

    5 If raw material is the limiting factor Pdt HV Pdt MV


    Contribution per rupee of material cost 1.7419355 1.3181818
    Q.6 Pdt HV, MV and LV can be outsourced from a local manufacturer at Rs.310, Rs.195 and 380
    if you assume machine hours are limited in supply as in Q.3

    6 If Outsourced Pdt HV Pdt MV


    Outsourcing cost-Assumed - not given in case 310 195
    Current variable manufacturing cost 232 144
    Savings if manufactured 78 51
    Savings per machine hour 26 25.5
    Ranking 1 2
    Produce inhouse 30000 43500
    Machine hours required 90000 87000

    Outsource units 1500

    See also sheet 1 for segment margin


    Pdt LV
    440

    100
    120
    90
    20 330
    110

    25

    3
    36.66666667

    Pdt LV
    15000
    45000 177000

    1650000 5982000

    2655000
    3231000 5886000
    96000
    106000
    -10000

    300000 1020000
    Pdt LV Total
    25000
    75000 177000

    2750000 6338000

    2655000
    3231000
    452000
    106000
    346000

    Pdt LV Total
    15000
    45000 123000

    0.916666667
    36.66666667

    6000
    18000 123000

    660000 6510000

    2655000
    3231000
    624000
    106000
    518000

    Pdt LV Total
    1.1
    .310, Rs.195 and 380 respectively, how many units of each product can be outsourced

    Pdt LV Total
    380
    310
    70
    23.33333333
    3

    177000

    25000
    Assume the direct fixed costs of HV, MV and LV are 10 lac, 5 lac and 12 lac rupees respectively, what is the answer t
    If MV is dropped
    Loss of contribution 1740000
    Saving in direct fixed costs 500000
    Change in profit 1240000

    Product mix of the last year Pdt HV


    Units 24000
    Total machine hours 72000

    Contribution margin from prev page 2592000


    Specific fixed costs 1000000
    Segment margin 1592000
    Less : Common fixed Costs
    Profit before interest and Taxes
    108
    ac rupees respectively, what is the answer to Q.1 of the case

    Pdt MV Pdt LV
    30000 15000
    60000 45000 177000

    1740000 1650000 5982000 Contribution towards direct and common fixed cost
    500000 1200000 2700000
    1240000 450000 3282000 Contribution towards common fixed cost
    3186000
    96000
    58 110
    d common fixed cost

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