Question
In: Accounting
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
| Products | ||||||||
| A | B | C | D | |||||
| Direct materials | $ | 14.80 | $ | 10.70 | $ | 11.50 | $ | 11.10 |
| Direct labor | 19.90 | 27.90 | 34.10 | 40.90 | ||||
| Variable manufacturing overhead | 4.80 | 3.20 | 3.10 | 3.70 | ||||
| Fixed manufacturing overhead | 27.00 | 35.30 | 27.10 | 37.70 | ||||
| Unit product cost | 66.50 | 77.10 | 75.80 | 93.40 | ||||
Additional data concerning these products are listed below.
| Products | ||||||||
| A | B | C | D | |||||
| Grinding minutes per unit | 4.30 | 5.80 | 4.80 | 3.90 | ||||
| Selling price per unit | $ | 76.60 | $ | 94.00 | $ | 87.90 | $ | 104.70 |
| Variable selling cost per unit | $ | 2.70 | $ | 1.70 | $ | 3.80 | $ | 2.10 |
| Monthly demand in units | 4,500 | 4,500 | 3,500 | 2,500 | ||||
The grinding machines are potentially the constraint in the production facility. A total of 71,400 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round your intermediate calculations to 2 decimal places.)
Solutions
Expert Solution
Solution:
| Computation of contribution margin per unit of constrained resource | ||||
| Particulars | Product A | Product B | Product C | Product D |
| Selling price per unit | $76.60 | $94.00 | $87.90 | $104.70 |
| Variable cost per unit: | ||||
| Direct material | $14.80 | $10.70 | $11.50 | $11.10 |
| Direct labor | $19.90 | $27.90 | $34.10 | $40.90 |
| Variable manufacturing overhead | $4.80 | $3.20 | $3.10 | $3.70 |
| Variable selling cost | $2.70 | $1.70 | $3.80 | $2.10 |
| Contribution margin per unit | $34.40 | $50.50 | $35.40 | $46.90 |
| Grinding minutes per unit | 4.3 | 5.8 | 4.8 | 3.9 |
| Contribution margin per minute of grinding machine | $8.00 | $8.71 | $7.38 | $12.03 |
Company will first allocate the resources to Product D as it is offering highest contribution margin per minute of grinding machine, then to product B, A and C respectively.
Grinding machine time used for production of:
Product D = 2500 * 3.90 = 9750 minutes
Product B = 4500*5.80 = 26100 minutes
Product A = 4500*4.3 = 19350
Available time = 71400 - (9750 + 26100 + 19350) = 16200 minutes
Maximum possible units of product C = 16200 / 4.80 = 3375 units
Therefore in order to meet demand of Product C, company is willing to pay maximum $7.38 per minute of grinding machine time.
ekkarill92 answered 2 years agoRelated Solutions
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
16.30
$
20.20
$
13.20
$
15.90
Direct labor
18.30
21.70
16.10
10.10
Variable manufacturing overhead
5.10
6.30
8.80
5.80
Fixed manufacturing overhead
28.20
15.10
15.20
17.20
Unit product cost
$
67.90
$
63.30
$
53.30
$
49.00
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
13.10
$
9.00
$
9.80
$
9.40
Direct labor
18.20
26.20
32.40
39.20
Variable manufacturing overhead
3.10
1.50
1.40
2.00
Fixed manufacturing overhead
25.30
33.60
25.40
36.00
Unit product cost
59.70
70.30
69.00
86.60
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
2.60
3.20
3.10
2.20...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
19.90
$
15.20
$
20.80
$
23.20
Direct labor
12.20
8.70
10.50
7.40
Variable manufacturing overhead
1.60
2.10
2.00
2.10
Fixed manufacturing overhead
10.80
11.90
8.80
10.70
Unit product cost
$
44.50
$
37.90
$
42.10
$
43.40
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
14.60
$
10.50
$
11.30
$
10.90
Direct labor
19.70
27.70
33.90
40.70
Variable manufacturing overhead
4.60
3.00
2.90
3.50
Fixed manufacturing overhead
26.80
35.10
26.90
37.50
Unit product cost
65.70
76.30
75.00
92.60
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
4.10
5.60
4.60
3.70...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
19.90
$
15.20
$
20.80
$
23.20
Direct labor
12.20
8.70
10.50
7.40
Variable manufacturing
overhead
$
1.60
$
2.10
$
2.00
$
2.10
Fixed manufacturing
overhead
10.80
11.90
8.80
10.70
Unit product cost
44.50
37.90
42.10
43.40
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
14.90
$
10.80
$
11.60
$
11.20
Direct labor
20.00
28.00
34.20
41.00
Variable manufacturing
overhead
4.90
3.30
3.20
3.80
Fixed manufacturing
overhead
27.10
35.40
27.20
37.80
Unit product cost
66.90
77.50
76.20
93.80
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
4.40
5.90
4.90
4.00...
Bruce Corporation makes four products in a single facility. These products have the following unit product...
Bruce Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
14.70
$
10.60
$
11.40
$
11.00
Direct labor
19.80
27.80
34.00
40.80
Variable manufacturing
overhead
4.70
3.10
3.00
3.60
Fixed manufacturing
overhead
26.90
35.20
27.00
37.60
Unit product cost
66.10
76.70
75.40
93.00
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
4.20
5.70
4.70
3.80...
Brown Corporation makes four products in a single facility. These products have the following unit product...
Brown Corporation makes four products in a single facility.
These products have the following unit product costs:
Products
A
B
C
D
Direct
materials
$13.10
$9.00
$9.80
$9.40
Direct labor
18.20
26.20
32.40
39.20
Variable
manufacturing overhead
3.10
1.50
1.40
2.00
Fixed manufacturing
overhead
25.30
33.60
25.40
36.00
Unit product
cost
$59.70
$70.30
$69.00
$86.60
Additional data concerning these
products are listed below.
Products
A
B
C
D
Grinding minutes per
unit
2.60
3.20
3.10
2.20
Selling price per
unit...
Master Company makes four products in a single facility. These products have the following unit product...
Master Company makes four products in a single facility. These
products have the following unit product costs:
Products
A
B
C
D
Direct materials
$
19.90
$
15.20
$
20.80
$
23.20
Direct labor
12.20
8.70
10.50
7.40
Variable manufacturing overhead
$
1.60
$
2.10
$
2.00
$
2.10
Fixed manufacturing overhead
10.80
11.90
8.80
10.70
Unit product cost
44.50
37.90
42.10
43.40
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit...
Bacon Company makes four products in a single facility. These products have the following unit product...
Bacon Company makes four products in a single facility. These
products have the following unit product costs: Products A B C D
Direct materials $ 14.90 $ 10.80 $ 11.60 $ 11.20 Direct labor 20.00
28.00 34.20 41.00 Variable manufacturing overhead 4.90 3.30 3.20
3.80 Fixed manufacturing overhead 27.10 35.40 27.20 37.80 Unit
product cost $ 66.90 $ 77.50 $ 76.20 $ 93.80 Additional data
concerning these products are listed below. Products A B C D
Grinding minutes per unit...
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