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:

Additional data concerning these products are listed below.

The mixing machines are potentially the constraint in the production facility. A total of 38,700 minutes are available per month on these machines. Direct labor is a variable cost in this company.

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.)

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.)

Glunn Company makes three products in a single facility. These products have the following unit product costs:

Explanation / Answer

Req 1: PRODUCT A PRODUCT B PRODUCT C TOTAL Maximum demand in units 1000 3000 2000 Mixing time required each unit 7.3 7 7.5 Total mixing minutes required 7300 21000 15000 43300 Total Mixing minutes required for all three products: 43300 minutes Req 2:   PRODUCT A PRODUCT B PRODUCT C Selling price per unit $149.20 $150.10 $145.30 Less: variable cost per unit Material $21.80 $18.30 $13.70 Labour $23.10 $23.90 $19.00 Variable manufacturing OH $10.20 $9.90 $9.50 Variable Selling cost $11.90 $11.70 $12.70 Contribution margin per unit $82.20 $86.30 $90.40 Divide: Mixing time per unit 7.3 7 7.5 Contribution margin per Minute             11.26             12.33             12.05 Ranking III I II Maximum Minutes available of Mixing 38700 Less: Minutes used in production of Product B (7 minuteX 3000) -21000 Available minutes 17700 Less: Minutes used in Production of Product C (7.5X 2000) -15000 Available Minutes for production of Product A 2700 Number of units of Product A can be produced (2700/7.3): 370 units Number of each produced for maximizing profits: Product A: 370 Unit Product B: 3000 Unit Product C: 2000 Unit Req 3: With additional hour of labour, the firm will produce Product A: Additonal amount per hour of mixing machine will be $675.60 per hour (i.e. $11.26 *60 mins) This is over and above the rate already paid.

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