Chef Gourmet, Inc., has assembled the following data pertaining to its two most
ID: 2475254 • Letter: C
Question
Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products Food Blender Processor Direct material Direct labor Manufacturing overhead @ $40 per machine hour Cost if purchased from an outside supplier Annual demand (units) $13 $ 31 28 80 106 21,000 30,000 19 40 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 purchased? Food Processor Blender Manufacture PurchaseExplanation / Answer
Particluars
Blendor
Food Processor
Direct Material
13
31
Direct Labor
19
28
Variable Manufacturing overhead
9
18
Total Variable Cost per unit
41
77
Cost of Purchase
61
106
Saving by Manufacturing inside
20
29
No of Machine hrs
1
2
Saving per hr by Manufacturing inside
20
14.5
Rank according highest saving
I
II
Particluars
Total No of Machine hrs available
52,000
hrs
Less : hrs used by manufacturing Blendor @1 hr per unit
21,000
hrs
Available hrs
31,000
hrs
No of units can be manufactured food processor
15,500
units
Particluars
Blendor
Food Processor
Demand
21,000
30,000
Manufacuture
21,000
15,500
Purchase
-
14,500
Particluars
Blendor
Food Processor
Direct Material
13
19
Direct Labor
19
28
Variable Manufacturing overhead
9
18
Total Variable Cost per unit
41
65
Cost of Purchase
61
106
Saving by Manufacturing inside
20
41
No of Machine hrs
1
2
Saving per hr by Manufacturing inside
20
20.5
Rank according highest saving
II
I
Particluars
Total No of Machine hrs available
52,000
hrs
Less : hrs used by manufacturing food processor @2 hrs per unit
52,000
hrs
No of units can be manufactured food processor
26,000
Units
Particluars
Blendor
Food Processor
Demand
21,000
30,000
Manufacuture
-
26,000
Purchase
21,000
4,000
Particluars
Blendor
Food Processor
Direct Material
13
31
Direct Labor
19
28
Variable Manufacturing overhead
9
18
Total Variable Cost per unit
41
77
Cost of Purchase
61
106
Saving by Manufacturing inside
20
29
No of Machine hrs
1
2
Saving per hr by Manufacturing inside
20
14.5
Rank according highest saving
I
II
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