Brief2
Introduction
Portal Corporation produces laser printers. The company operates in Utah, in the United States. The same laser printers are produced in two plants in Ogden and Sandy. The first factory, in Ogden, is the new one. Sandy is the older one. For the coming year, the plan for the Portal Corporation is to produce 120 000 laser printers. The purpose of this document is to analyze how the production of 120 000 units should be distributed between the two plants to maximize operating income.
Analysis
According to the efficiency data both of the plants can typically work for 240 days, but maximum annual capacity is 300 days. Newer company, Ogden can manufacture 250 units of laser printers per day, the older plant can produce 200 units per day. Variable cost per unit in Ogden is $110,00; in Sandy variable cost is $15 higher. Selling price for the printer is $320,00. Based on the data mentioned above the contribution margin per unit of normal production is $210,00 in Ogden and $195,00 in Sandy. Fixed costs per unit based on normal capacity are $70,00 and $39,00; total fixed cost is $4 200 000 for the Ogden plant and $1 872 000 for Sandy. In the circumstance when Ogden plant produces 20 000 units, and 9 600 units are produced by Sandy, cost and income for both plants will be equal. On the other hand, when the number of working days exceeds 240, the variable costs are increased by $5 per unit in Ogden and $10 per unit in Sandy.
The newer plant can produce 60 000 units, at maximum capacity some units can be increased to 75 000 units. Typical size for the older plant is 48 000 units, and it can be increased to 60 000 units when working 300 days. For normal capacity, the total contribution margin in Ogden is $12 600 000 and $11 580 000 in Sandy. After subtracting the fixed costs from contribution margins; it gives the total operating income $8 400 000 in Ogden and $9 708 000 in Sandy.
When considering the distribution of the number of units produced between two
Portal Corporation produces laser printers. The company operates in Utah, in the United States. The same laser printers are produced in two plants in Ogden and Sandy. The first factory, in Ogden, is the new one. Sandy is the older one. For the coming year, the plan for the Portal Corporation is to produce 120 000 laser printers. The purpose of this document is to analyze how the production of 120 000 units should be distributed between the two plants to maximize operating income.
Analysis
According to the efficiency data both of the plants can typically work for 240 days, but maximum annual capacity is 300 days. Newer company, Ogden can manufacture 250 units of laser printers per day, the older plant can produce 200 units per day. Variable cost per unit in Ogden is $110,00; in Sandy variable cost is $15 higher. Selling price for the printer is $320,00. Based on the data mentioned above the contribution margin per unit of normal production is $210,00 in Ogden and $195,00 in Sandy. Fixed costs per unit based on normal capacity are $70,00 and $39,00; total fixed cost is $4 200 000 for the Ogden plant and $1 872 000 for Sandy. In the circumstance when Ogden plant produces 20 000 units, and 9 600 units are produced by Sandy, cost and income for both plants will be equal. On the other hand, when the number of working days exceeds 240, the variable costs are increased by $5 per unit in Ogden and $10 per unit in Sandy.
The newer plant can produce 60 000 units, at maximum capacity some units can be increased to 75 000 units. Typical size for the older plant is 48 000 units, and it can be increased to 60 000 units when working 300 days. For normal capacity, the total contribution margin in Ogden is $12 600 000 and $11 580 000 in Sandy. After subtracting the fixed costs from contribution margins; it gives the total operating income $8 400 000 in Ogden and $9 708 000 in Sandy.
When considering the distribution of the number of units produced between two