Gannett Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Gannett Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $550,000. In addition, the following information is available about the three products:
|
|
Large |
Medium |
Small |
|
Unit selling price |
$240 |
$180 |
$120 |
|
Unit variable cost |
126 |
80 |
68 |
|
Unit contribution margin |
$114 |
$100 |
$ 52 |
|
Autoclave hours per unit |
6 |
10 |
4 |
|
Total process hours per unit |
20 |
16 |
12 |
|
Budgeted units of production |
2,500 |
2,500 |
2,500 |
Assume that Gannett Glass wanted to price all products so that they produced the same profit potential as the highest profit product. Thus, determine the prices for each of the products so that they would produce a profit equal to the highest profit product.