Question

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

	Product
	A			B			C
Direct materials	$	34.10		$	50.60		$	57.00
Direct labor	$	21.50		$	24.10		$	14.90
Variable manufacturing overhead	$	1.30		$	0.70		$	0.60
Fixed manufacturing overhead		11.20			6.80			7.40
Unit product cost		$68.10			$82.20			$79.90
Additional data concerning these products are listed below.
Mixing minutes per unit		1.30			0.90			0.30
Selling price per unit	$	71.00		$	93.40		$	86.90
Variable selling cost per unit	$	1.90		$	2.40		$	2.20
Monthly demand in units		2,100			4,100			2,100

The mixing machines are potentially the constraint in the production facility. A total of 6,950 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 your intermediate calculations to 2 decimal places and final answers to the nearest whole number.) a   b c   ABCOptimal production :

      

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 your answer to 2 decimal places.)

  

Answer 1

ans 1
	Product A	Product B	Product c	Total
No. of units	2100	4100	2100
No. of minites required	1.3	0.9	0.3
Total minutes required	2730	3690	630	7050
ans 2
	Product A	Product B	Product c
Selling Price	$71	$93.40	$86.90
Less: variable cost
Direct Material	$34.10	50.6	57
Direct labor	21.5	24.1	14.9
Variable manufacturing overhead	1.3	0.7	0.6
Variable selling expenses	1.9	2.4	2.2
Total variable cost	$58.80	$77.80	$74.70
Contribution margin C	$12.20	$15.60	$12.20
No. of minutes required N	1.3	0.9	0.3
Contribution margin per minute C/N	$9.38	$17.33	$40.67
Ranking	3	2	1
Optimal production no. of minutes devoted	2630	3690	630
	(6950-630-3690)
ans b
Optimal production	2023	4100	2100
	(2630/1.3)
ans c
The company can pay additional for Product A contribution margin per minute
as that is required to be produced
$9.38*60	562.80