#9 Problem 14-46 Production Decisions; Limited Capacity (LO 14-5, 14-6) Chef Gou
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Question
#9 Problem 14-46 Production Decisions; Limited Capacity (LO 14-5, 14-6) Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products Food Blender Processor Direct material S 15 S 28 8 36 40 80 62 130 1.000 40.000 Direct labor Manufacturing overhead $40 per machine Cost if purchased from an outside supplier Annual demand (units) Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $20. Management has a policy of filing all sales orders, even if it means purchasing units from ourside suppliers Required: 1. If 66.000 machine hours are available. and management desires to follow an optima strategy, how many units of each product should the firm manufacture? How many units of? ch product should bC purchases 3.Explanation / Answer
1. Calculation of Contribution per machine hours
Higher benefit in Blender than Food processing, Firstly we have to produce 31000 units of Blender then utilised balance hours in Food processing.
Hours required in Blender for 31000 units = 31000*1 = 31000 hour
Balance Hours = 66000 - 31000 = 35000 hours
No of Food processing to be manufactured = Balance hours/ machine hours req
= 35000/2 = 17500 units
2. If Direct Material costreduced to $15 per unit
Higher benefit in Food processing than Blender , Firstly we have to produce 40000 units of Food processing then utilised balance hours in Blender.
No of Food processing to be manufactured = Available hours/ machine hours req
= 66000/2 = 33000 units
Blender = 0
df Blender Food Processor Direct Material 15 28 Direct Labour 8 36 Manufacturing O/H - Variable 20 40 Total Variable Cost 43 104 Purchase Cost 62 130 Benefit in Manufacture 19 26 Machine hours required 1 2 Benfit per machine hours 19 13Related Questions
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