Chef Gourmet, Inc., has assembled the following data pertaining to its two most

Question

Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products. Food Direct material Direct labor Manufacturing overhead $40 per machine hour Cost if purchased from an outside supplier Annual demand (units) $ 13 S 31 28 80 106 21,000 30,000 40 61 Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $31. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Required: 1. If 52,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be Blender Manufacture Purchase

Explanation / Answer

Macine hours required for product blender = 40 /40 = 1

Macine hours required for product food processor = 80 / 40 = 2

1)

now inorder to meet the demand purchase

Blender = 17334 (52000/3)

Food processor = 17333 [(52000/3)*2]

2)

Blender hours = 1

Machine hours for food processor = 94*2 / 106 = 1.77 hours

X = hours per unit of blender       1.77X = hours for food processor

X + 1.77X = 52000

X = 52000 / 2.77 = 18773

Total hours of blender = 18773

Total hours of food processor = 52000 - 18773 = 33227

blender units = 18773

food processor units = 33227 / 1.77 = 18772

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