Reference no: EM131267726
Your Company makes three products in a single facility. These products have the following unit product costs:
Product X Product Y Product Z
Direct material $28.00 $26.00 $27.00
Direct labor 14.00 13.00 12.00
Variable manufacturing overhead 3.50 5.50 6.75
Fixed manufacturing overhead 25.00 29.00 22.00
Unit cost $70.50 $73.50 $67.75
Additional data concerning these products are listed below:
Product X Product Y Product Z
Mixing minutes per unit 2.5 4.0 5.0
Selling price per unit $80.00 $85.00 $79.00
Variable selling cost per unit $6.00 $5.00 $4.00
Monthly demand in units 1,750 3,500 3,000
The mixing machines are potentially the constraint in the production facility. A total of 30,000 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
QUESTION- 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.)
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