Question
In: Accounting
Garson, Inc. produces three products. Data concerning the selling prices and unit costs of the three...
Garson, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:
| Product | ||||||
| F | G | H | ||||
| Selling price | $ | 60 | $ | 40 | $ | 70 |
| Variable costs | $ | 25 | $ | 15 | $ | 30 |
| Fixed costs | $ | 50 | $ | 5 | $ | 47 |
| Milling machine time (minutes) | 10 | 5 | 5 | |||
Fixed costs are applied to the products on the basis of direct labor hours.
Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,700 minutes of milling machine time available this week.
Required:
a. Given the milling machine constraint, which product should be emphasized?
b. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of milling machine time?
Solutions
Expert Solution
a.
| F | G | H | |
| Selling Price | $ 60.00 | $ 40.00 | $ 70.00 |
| Variable Costs | $ 25.00 | $ 15.00 | $ 30.00 |
| Contribution Margin per unit | $ 35.00 | $ 25.00 | $ 40.00 |
| Milling Machine Minutes per unit | 10 | 5 | 5 |
| Contribution Margin per minute | $ 3.50 | $ 5.00 | $ 8.00 |
Since contribution Margin per minute for Product H is highest,
Product H should be emphasized.
b.
Company willing to pay = 8 x 60 = $480 per hour
ekkarill92 answered 2 years agoRelated Solutions
Garson, Inc. produces three products. Data concerning the selling prices and unit costs of the three...
Garson, Inc. produces three products. Data concerning the
selling prices and unit costs of the three products appear
below:
Product
F
G
H
Selling price
$
75
$
55
$
85
Variable costs
$
50
$
40
$
55
Fixed costs
$
45
$
8
$
42
Milling machine time (minutes)
10
5
5
Fixed costs are applied to the products on the basis of direct
labor hours.
Demand for the three products exceeds the company's productive
capacity. The milling...
Information regarding the selling prices and unit costs of three products is as follows: Product F...
Information regarding the selling prices and unit costs of three
products is as follows:
Product
F
G
H
Selling price
$
70
$
50
$
80
Variable costs
$
30
$
20
$
35
Fixed costs
$
10
$
7
$
7
Machine time (minutes)
10
5
5
Fixed costs are applied to the products on the basis of direct
labor hours.
Due to the amount of machine time available, the company cannot
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Dalton Inc. produces and sells three products. Unit data
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D
E
F
Selling price
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Direct labor costs
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83.60
34.10
Other variable costs
90.00
78.00
140.00
The company has 1,900 hours of labor available to build
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Product
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B
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Selling price
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42.80
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The company estimates that it can sell 750 units of each product
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$
72.00
$
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Variable
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26.40
18.00
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36.00
45.60
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concerning the three products follow (per unit):
Product
A
B
C
Selling price
$
72.00
$
60.00
$
62.00
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Direct materials
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18.00
9.00
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27.00
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$
28.80
$
15.00
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25
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16.50
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33.00
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49.50
50.40
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$
32.00
$
16.50
$
21.60
Contribution margin ratio
40
%
25
%
30
%
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Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):...
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30
%
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