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How many units of each product should be purchased

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Reference no: EM131621289

Question - Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products.

Blender

Food Processor

  Direct material

$27

$47

  Direct labor

21

34

  Manufacturing overhead @ $56 per machine hour

56

112

  Cost if purchased from an outside supplier

71

117

  Annual demand (units)

29,000

36,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $44. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

1. If 62,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?

2. With all other things constant, if management is able to reduce the direct material for a food processor to $27 per unit, how many units of each product should be manufactured? Purchased?

Reference no: EM131621289

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