Chap 12 QZ (QUESTION 7) Glover Company makes three products in a single facility
ID: 2595283 • Letter: C
Question
Chap 12 QZ (QUESTION 7)
Glover 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 6,870 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?
b. How much of each product should be produced to maximize net operating income?
c. 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?
Required A
How many minutes of mixing machine time would be required to satisfy demand for all three products?
Required B
How much of each product should be produced to maximize net operating income? (Round final answers to the nearest whole unit.)
Required C
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 final answer to 2 decimal places.)
Product A B C Direct materials $ 34.70 $ 51.20 $ 57.60 Direct labor 22.10 24.70 15.50 Variable manufacturing overhead 1.90 1.30 1.20 Fixed manufacturing overhead 11.80 7.40 8.00 Unit product cost $ 70.50 $ 84.60 $ 82.30Explanation / Answer
A. Demand on the mixing machine:
Total time required for all products=6970 minutes
B.
Optimal production plan:
*Minutes used in production of product B and C:
=(2000×.20)+(4000×.90)
=4000 minutes
Remaining minutes to used by product A=6870-4000
=2870 minutes
Units produced of product A by using these mixing minutes:
=2870/1.10 minutes
=2609 units
C. The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $14.36
A B C Total Mixing minutes per unit 1.10 0.90 0.20 Monthly demand in units 2700 4000 2000 Total minutes required 2970 3600 400 6970 minutesRelated Questions
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