Glocker Company makes three products in a single facility. These products have t

Question

Glocker Company makes three products in a single facility. These products have the following unit product costs Product Direct materials Direct labor Variable manufacturing $32.90 49.40 55.80 $ 20.30 $ 22.90 $ 13.70 $1.30 $ 0.70 $ 0.80 overhead Fixed manufacturing overhead 13.40 9.00 9.60 Unit product cost $67.90$82.00 $79.90 Additional data concerning these products are listed below Mixing minutes per unit Selling price per unit Variable selling cost per unit $.70 $ 1.20 Monthly demand in units 1.30 1.10 0.30 $ 59.00 81.40 $ 74.90 2.20 1,400 2,100 3,400 The mixing machines are potentially the constraint in the production facility. A total of 6,790 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? Total minutes required

Explanation / Answer

ReqA: Product A Product B Product C Total Maximum Demand in units 2100 3400 1400 6900 Mixing Min required per unit 1.3 1.1 0.3 Total Mixing Min required for maximum demand 2730 3740 420 6890 mins Total Minutes required 6890 mins Req B: Product A Product B Product C Maximum Demand in units 2100 3400 1400 Mixing Min required per unit 1.3 1.1 0.3 Selling price per unit 59 81.4 74.9 Less: variable cost per unit: Direct material' 32.9 49.4 55.8 Direct labour 20.3 22.9 13.7 variable manufacturing overheads 1.3 0.7 0.8 Selling overheads 0.7 1.2 2.2 Contribution per unit 3.8 7.2 2.4 Mixing min required per unit 1.3 1.1 0.3 Contribution per min of mixing time 2.92 6.55 8 Ranking for production III I II Maximum Mins available 6790 mins Less: requird for ProductB 3740 mins (Max demand 3400 units@1.1 min) Remaining mins 3050 mins Less: Required for ProductC 420 mins (Max demand 1400 units@0.3) Available for production of Product A 2630mins Units of Product A produced (2630 / 1.3) 2023 units Product A Product B Product C Optimal production for max Income 2023 units 3400 units 1400 units Req 3: As production of product A can only be done with the additional hour of mixing time, the company will maximum spenmd upto the maximum contribution earned from the product A, produced from one hour. The maximum amount the companmy is willing to spend is $ 175.38 (i.e. 60 min *3.8/1.3 min)

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