ecure https://newconnect.mheducation.com/flow/connect.html 3 Chapters 10-13 Save
ID: 2593882 • Letter: E
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ecure https://newconnect.mheducation.com/flow/connect.html 3 Chapters 10-13 Saved Help Save & Exit Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $17.5e $21.40 $14.40 $17.1e 19.50 22.90 17.30 11.30 6.30 7.5e 10.ee 7.ee 29.40 16.3e 16.40 18.40 72.70 68.10 58.10 53.8e 00-53:50 Additional data concerning these products are listed below. Products Grinding minutes per unit Selling price per unit Variable selling cost per unit Monthly demand in units 2.40 1.45 1.e0 1.30 $88.20 $80.60 $77.40 $72.10 $ 3.25 3.95 $ 4.70 $5.40 4,900 3,900 3,900 5,9e0 The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this companv. 4 of 16 Next >Explanation / Answer
Contribution per unit for each product =
A = $88.20 - ($17.50+$19.50+$6.30) = $44.90
B = $80.60 - ($21.40+$22.90+7.50) = $28.80
C = $77.40 - ($14.40+$17.30+10) = $35.70
D = $72.10 - ($$17.10+$11.30+$7) = $36.70
The product which gives highest contribution per minute shall generate maximum profit
Contribution per minute is calculated below:
A = $44.90/2.4 = $18.71
B = $28.80/1.45 = $19.86
C = $35.70/1 = $35.70
D = $36.70 / 1.3 = 28.23
Since product C gives maximum contribution per unit of constraint resource, it shall make the most profitable use of grinding machine
Option C us correct
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