Morris Minor Corporation manufactures two products each of which require machine
ID: 430177 • Letter: M
Question
Morris Minor Corporation manufactures two products each of which require machine processing and labor operations. There is extensive demand for both products, but Morris Minor could devote all of its capacity to manufacturing either product. Relevant financial information is as follows:
Product A-12
Product A-14
Unit selling price
$220
$80
Unit variable cost
$90
$40
Machine hours per unit
1.4
.4
Labor hours per unit
6
2
In 2014 the company will have a maximum capacity of 160,000 machine hours and 120,000 labor hours. Fixed costs in 2014 will be $1,000,000.
Compute the most profitable combination of products to be produced in 2014.
Can you please explain in detail?
Product A-12
Product A-14
Unit selling price
$220
$80
Unit variable cost
$90
$40
Machine hours per unit
1.4
.4
Labor hours per unit
6
2
Explanation / Answer
The Company manufactures goods A- 12 and A - 14.
Details of the product A - 12 :
Unit variable cost of this product. - $ 90
Unit Selling price of the product - $220
No. of machine hours per unit - 1.4
Unit Labors per Hours : 6
Manufacturing hours per unit : 6 + 1.4 = 7.4 hours
7.4Hours are spent on producing the unit product of A - 12.
Details of the Product A - 14 :
Unit variable cost of this product : $ 40
Unit selling price of the product : $ 80
No. of machine hours per unit : 0.4
No. of labor hours per unit : 2.
Manufacturing hours per unit : 2 + 0.4 = 2.4hrs
2.4 Hours are spent on producing the product A - 14 .
The total number of machine hours are 160,000.
For knowing the valuve of exact no. of hours spent on individual products :
let he number of hours spent on products be - x.
1 . 4 x + .4 x= 160,000
therfore x = 88889 Hours
No. of machine hours spent of producing the product A -14= 0.4 * x= 0.4 * 88889 = 35555 hours per year 2014.
No. of machine hours spent on producing the product A - 12 = 1.4 * x = 1.4 *88889 = 124444 hours per year 2014.
Total no. of labor hours per unit is 120,000.
Let X be the no. of hours spent in a year
No. of labour hours for product A - 12 = 6 x
No . of labor hours for product A - 14 = 2x
Total no. of hours - 6x + 2x = 120,000
8x = 120,000
therefore x= 15000.
The no. of labour hours per year on product A - 12 = 6x = 6 * 15000= 90000.
The no. of labour hours per year on product A - 14= 2x = 2 * 15000 = 30000.
Acc. to my opinion , profitable product is A - 14.
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