Holvey Company makes three products in a single facility. Data concerning these

Question

Holvey Company makes three products in a single facility. Data concerning these products follows: The mixing machines are potentially the constraint in the production facility. A total of 13,000 minutes are available per month on these machines. Direct labor is a variable cost in this company. Required: 1. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.) 2. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.) 3. How would your answer from (1) above change if direct labor is not considered a variable cost? For any calculations, all work must be shown in order to receive full credit.

Explanation / Answer

1

2

The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $13.75.x60 minutes =825 per hour

3

A B C Selling price per unit 122.5 161.7 150.3 Direct materials 46.5 88.4 99.6 Direct labor 37.45 49 25.9 Variable manufacturing overhead 2.1 1.05 0.9 Variable selling cost per unit 3.15 4 3.7 Total variable cost per unit 89.2 142.45 130.1 Contribution margin per unit 33.3 19.25 20.2 Mixing minutes per unit 2.1 1.4 0.7 Contribution margin per minute 15.86 13.75 28.86 Rank 2 3 1 Units Produced 3500 2286 3500 Minutes Required 7350 3200 2450

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.