Glocker Company makes three products in a single facility. These products have t
ID: 2593161 • Letter: G
Question
Glocker Company makes three products in a single facility. These products have the following unit product costs:
Product
The mixing machines are potentially the constraint in the production facility. A total of 8,110 minutes are available per month on these machines. Direct labor is a variable cost in this company.
How many minutes of mixing machine time would be required to satisfy demand for all three products?
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 the nearest whole number.)
Up to how much should the company be willing to pay for one additional hour 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.)
Glocker Company makes three products in a single facility. These products have the following unit product costs:
Glocker Company makes three products in a single facility. These products have the following unit product costs:
Explanation / Answer
a. Minutes of mixing machine time required to satisfy demand for all three products would be
Product A- 1.5 minute per product * 2300 = 3450 Minutes
Product B -1.1 minute per product * 3600 = 3960 Minutes
Product C -0.5 minute per product * 1600 = 800 Minutes
so Total Minutes required = 8210 Minutes
b. Each product to be produced to maximize net operating income will be :
A B C
Total Manfacturing cost 68.3 82.4 79.9
Less : Fixed Variable overhead (13.2) (8.8) (9.4)
Variable Manfacturing cost 55.1 73.6 70.5
Selling Price 61 83.4 76.9
Contribution 5.9 9.8 6.4
Mixing Minutes 1.5 1.1 0.5
Contribution per one Mixing minutes 3.93 8.90 12.8
Ranking ( Ist for highest contribution and so on ) III II I
So now we understood that we will produce Product B & C to maximum , and Product A to remaining resources.
Each product to be produced to maximize net operating income will be :
Product Minutes Products to be Mfg. Minutes
C 0.5 1600 800
B 1.1 3600 3960
A 1.5 2233 (3350/1.5) 3350 ( 8110-800-3960)
c. See , if we will pay for extra mixing minutes , we will be able to produce Product A to it's fullest capacity i.e. 2300 units. by producing one extra unit we will earn $ 3.93 per minute, so maximum we can pay is $ 3.93 per minute.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.