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
produce all the units demanded. The only...
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. Product...
Dalton Inc. produces and sells three products. Unit data
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Product
D
E
F
Selling price
$181.00
$283.20
$233.00
Direct labor costs
28.60
83.60
34.10
Other variable costs
90.00
78.00
140.00
The company has 1,900 hours of labor available to build
inventory in anticipation of the company’s peak season. Management
is trying to decide which product should be produced. The direct
labor hourly rate is $11.
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Direct Labor Cost Per unit
Direct Labor Hours...
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. Product...
Dalton Inc. produces and sells three products. Unit data
concerning each product is shown below.
Product
D
E
F
Selling price
$ 190.6
$ 297.5
$ 246.4
Direct labor costs
28.6
84.7
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Other variable costs
97
78
141
The company has 2,200 hours of labor available to build inventory
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Benoit Company produces three products—A, B, and C. Data
concerning the three products follow (per unit):
Product
A
B
C
Selling price
$
84.00
$
70.00
$
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Variable expenses:
Direct materials
25.20
21.00
9.00
Other variable expenses
25.20
31.50
42.80
Total variable expenses
50.40
52.50
51.80
Contribution margin
$
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$
17.50
$
22.20
Contribution margin ratio
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The company estimates that it can sell 750 units of each product
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Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):...
Benoit Company produces three products—A, B, and C. Data
concerning the three products follow (per unit):
Product
A
B
C
Selling
price
$
88.00
$
72.00
$
78.00
Variable
expenses:
Direct
materials
26.40
18.00
9.00
Other variable
expenses
26.40
36.00
45.60
Total variable
expenses
52.80
54.00
54.60
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margin
$
35.20
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margin ratio
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%
25
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%
The company estimates that it can sell 900 units of each product
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Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):...
Benoit Company produces three products—A, B, and C. Data
concerning the three products follow (per unit): Product A B C
Selling price $ 88.00 $ 72.00 $ 78.00 Variable expenses: Direct
materials 26.40 18.00 9.00 Other variable expenses 26.40 36.00
45.60 Total variable expenses 52.80 54.00 54.60 Contribution margin
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The company estimates that it can sell 900 units of each product
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Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):...
Benoit Company produces three products—A, B, and C. Data
concerning the three products follow (per unit):
Product
A
B
C
Selling price
$
72.00
$
60.00
$
62.00
Variable expenses:
Direct materials
21.60
18.00
9.00
Other variable expenses
21.60
27.00
34.40
Total variable expenses
43.20
45.00
43.40
Contribution margin
$
28.80
$
15.00
$
18.60
Contribution margin ratio
40
%
25
%
30
%
The company estimates that it can sell 1,000 units of each
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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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A
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C
Selling price
$
80.00
$
66.00
$
72.00
Variable expenses:
Direct materials
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16.50
12.00
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33.00
38.40
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48.00
49.50
50.40
Contribution margin
$
32.00
$
16.50
$
21.60
Contribution margin ratio
40
%
25
%
30
%
The company estimates that it can sell 700 units of each product
per month. The same...
Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):...
Benoit Company produces three products—A, B, and C. Data
concerning the three products follow (per unit):
Product
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B
C
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$
72.00
$
60.00
$
62.00
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Direct materials
21.60
18.00
9.00
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21.60
27.00
34.40
Total variable expenses
43.20
45.00
43.40
Contribution margin
$
28.80
$
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$
18.60
Contribution margin ratio
40
%
25
%
30
%
The company estimates that it can sell 1,000 units of each
product per month. The same...
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