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Part 1

Factoring resource constraints into product mix decisions

Rose Incorporated manufactures two types of vases, small and large. The following per-unit data are available.

Small Vase Large Vase

Sale price $60 $100

Variable costs $35 $60

Machine hours required for 1 vase 1 2

Total fixed costs are $600,000, and Rose Incorporated can sell a maximum of 25,000 units of each type of vase annually. Machine hour capacity is 50,000 hours per year.

a. Determine the contribution margin per unit for each type of vase.

b. Determine the contribution margin per machine hour for each type of vase.

c. Determine the number of units of each style of vase that Rose Incorporated should produce to maximize operating income.

d. What is the dollar amount of the maximum operating income as calculated in C above?

Part 2

Financial Statement Analysis

The following information relates to Harris Corporation.

Account	Current year	Prior year
Net sales (all credit)	$520,125	$499,500
Cost of goods sold	$375,960	$353,600
Gross profit	$144,165	$145,900
Income from operations	$ 95,500	$ 79,900
Interest expense	$ 23,500	$ 19,500
Net income	$ 57,600	$ 51,600
Cash	$ 30,600	$ 15,900
Accounts receivable, net	$ 33,800	$ 23,200
Inventory	$ 42,000	$ 30,300
Prepaid expenses	$ 2,000	$ 1,500
Total current assets	$ 108,400	$ 70,900
Total long-term assets	$ 62,000	$ 38,000
Total current liabilities	$ 46,000	$ 41,600
Total long-term liabilities	$ 20,000	$ 22,700
Common stock, no par, 3,000 shares, value $50/share	$ 30,000	$ 30,000