Question

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:ProductsA B C DDirect materials $ 14.60 $ 10.50 $ 11.30 $ 10.90Direct labor 19.70 27.70 33.90 40.70Variable manufacturing overhead 4.60 3.00 2.90 3.50Fixed manufacturing overhead 26.80 35.10 26.90 37.50Unit product cost 65.70 76.30 75.00 92.60Additional data concerning these products are listed below.ProductsA B C DGrinding minutes per unit 4.10 5.60 4.60 3.70Selling price per unit$76.40 $93.80 $87.70 $104.50Variable selling cost per unit $ 2.50 $ 1.50 $ 3.60 $ 1.90Monthly demand in units 4,300 4,300 3,300 2,300The grinding machines are potentially the constraint in the production facility. A total of 65,000 minutes are available per month on these machines.Direct labor is a variable cost in this company.Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity?

Answer 1

Answer:

A 4,300 units

B 4,300 units

C 3,213 units

D 2,300 units

Explanation:

We should consuder the minutes available to calcualte the strain resource contribution per product:

$\left[\begin{array}{ccccc}&A&B&D&C\\sales&76.4&93.8&87.7&104.5\\Variable&41.4&42.7&51.7&57\\CM&35&51.1&36&47.5\\Constrain resource&4.1&5.6&4.6&3.7\\CM per constrain&8.54&9.125&7.83&12.84\\\end{array}\right]$

We first do C, then B, then A and the remainder on C

                A           B              C                D

Constrain      4.10     5.60          4.60           3.70  

units        4,300      4,300   3,300         2,300

subtotal  17,630.00  24,080.00   15,180.00   8,510.00  

we got 65,000 min so we subtracrt in the proposed order:

65,000- 8,510 - 24,080 - 17,630 = 14,780

now we divide by the use in minute of C to know how many units to produce:

14,780 / 4.6 = 3,213