Solution-How much of each product should be produced

How much of each product should be produced

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Reference no: EM132846461

Question - Buddy Company makes three products in a single facility. These products have the following unit product costs:

	Product
	A	B	C
Direct materials	$12.80	$9.30	$4.70
Direct labor	14.10	14.90	10.00
Variable manufacturing overhead	1.20	0.90	0.50
Fixed manufacturing overhead	18.50	17.20	23.70
Unit product cost	46.60	42.30	38.90

Additional data concerning these products are listed below

	Product
	A	B	C
Mixing minutes per unit	3.70	3.40	3.90
Selling price per unit	$59.20	$60.10	$55.30
Variable selling cost per unit	$2.90	$2.70	$3.70
Monthly demand in units	2,000	4,000	2,000

The mixing machines are potentially the constraint in the production facility. A total of 24,200 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? (Round off to the nearest whole unit.)

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 off to the nearest whole cent.)

Reference no: EM132846461

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How much of each product should be produced

Reference no: EM132846461

Reference no: EM132846461

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