Question

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
Selling price per unit	$	76.50	$	93.90	$	87.80	$	104.60
Variable selling cost per unit	$	2.60	$	1.60	$	3.70	$	2.00
Monthly demand in units		4,400		4,400		3,400		2,400

The grinding machines are potentially the constraint in the production facility. A total of 68,100 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.) 1_04_2014_QC_58425, 11_17_2014_QC_58425,Garrison 16e Rechecks 2017-09-13

Multiple Choice

$12.42

$3.80

$7.60

$10.36

Answer 1

Products
	A	B	C	D
Selling price per unit	$76.50	93.9	87.8	104.6
Less: Variable cost
Direct materials	14.7	10.6	11.4	11
Direct labor	19.8	27.8	34	40.8
Variable manufacturing overhead	4.7	3.1	3	3.6
Variable selling cost	2.6	1.6	3.7	2
Total variable cost	41.8	43.1	52.1	57.4
Contribution margin per unit	$34.70	$50.80	$35.70	$47.20
Grinding minute required per unit G	4.2	5.7	4.7	3.8
Contribution margin per minute	$8.26	$8.91	$7.60	$12.42
ranking	3	2	4	1
Month demand D	4400	4400	3400	2400
Total minutes required G*D	18480	25080	15980	9120	68660
Total available					68100
So the prodyuct produced	4400	4400	and remaining	2400
			for it
So additional price that can be paid is for the product C as hours for it are less available
it is the contribution margin per minute for product C
So option C is correct $7.6
If any doubt please comment. If satisfied you can rate the answer