Glunn Company makes three products in a single facility. These products have the

Question

Glunn Company makes three products in a single facility. These products have the following unit product costs: Product A B C Direct materials $ 15.30 $ 11.80 $ 7.20 Direct labor 16.60 17.40 12.50 Variable manufacturing overhead 3.70 3.40 3.00 Fixed manufacturing overhead 21.00 19.70 26.20 Unit product cost $ 56.60 $ 52.30 $ 48.90 Additional data concerning these products are listed below. Product A B C Mixing minutes per unit 4.70 4.40 4.90 Selling price per unit $ 84.20 $ 85.10 $ 80.30 Variable selling cost per unit $ 5.40 $ 5.20 $ 6.20 Monthly demand in units 2,000 4,000 2,000 The mixing machines are potentially the constraint in the production facility. A total of 31,000 minutes are available per month on these machines. Direct labor is a variable cost in this company. Required: a. How many minutes of mixing machine time would be required to satisfy demand for all three products? Product A B C Total minutes required b. How much of each product should be produced to maximize net operating income? (Round your intermediate calculations to 2 decimal places and final answers to nearest whole unit.) Product A B C Optimal production c. Up to how much should the company be willing to pay for one additional minute of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round your answer to 2 decimal places.) Company willing to pay $

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Ans-

.... ..... .... ... ... .... .... ..... ..... ..... ..... ..... ..... .... Product... .... .... ... .... ....   ... .... ..... ..... .... ..... ..... .... .... ..... ..... ..... ..A.. .... ..... B .... .... ..... C... ....   Mixed minutes per unit... .... ..... .... .... .... ... 4.70.... ....4.40... .... .....4.90   Monthly demand in units... .... .... .... .... ..... 2,000.... .... 4,000... .... .. 2,000   Total minutes required... .... .... .... .... ....... ..9,400 ... ...17,600 ... .... .9,800   Total time required for all products: 36,800   B. How much of each product should be produced to maximize net operating income?   .... ..... .... ... ... .... .... ..... ..... ..... ..... ..... ..... .... Product... .... .... ... .... ....   ... .... ..... ..... .... ..... ..... .... .... ..... ..... ..... ..A.. .... ..... B .... .... ..... C... ....   Selling price per unit.... .... ... .... ..... .... ..... $84.20 ..... $85.10 ... .... $80.30   Direct Materials... ..... .... ..... .... .... ..... ..... $15.30 .... . $11.80 ... ... .. $7.20   Direct Labor.... ... ... ... ... ... .... .... .... .... .... 16.60 ... ... 17.40 .... ..... 12.50   Variable Manufacturing Overhead .... .... .... 3.70 ... .... 3.40 ... ... .... 3.00   Variable selling cost per unit... .... .... .... ..... $5.40 ... ....$5.20 .... ..... $6.20   Total variable cost per unit .. ... ... ... ... .... ....41.00 ... ....37.80 .... .....28.90   Contribution margin per unit .. ... ... ... ... .... ..$43.20*.....$47.30 .......$51.40   Mixed minutes per unit... .... ..... .... .... .... ... 4.70.... ....4.40... .... .....4.90   Contribution margin per unit ...... ...... ...... ..... $9.19**......$10.75 ..... .....$10.49   Rank in terms of profitability ... .... ..... .... .... ......3 ..... ........1 ...... ..... ......2   Optimal production ...... ........ ....... ........ ....... ....756 ..... ...4,000 ..... ....2,000   *($84.20 - 41.00)   **($43.20/4.70)   756=reminaing minutes of mixing machine/minutes required per unit C. 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?   The company should be willing to pay up to the contribution margin per minute for marginal job, which $9.19

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