Brown Corporation makes four products in a single facility. These products have
ID: 2456484 • Letter: B
Question
Brown Corporation makes four products in a single facility. These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$15.50
$11.40
$12.20
$11.80
Direct labor
20.60
28.60
34.80
41.60
Variable manufacturing overhead
5.50
3.90
3.80
4.40
Fixed manufacturing overhead
27.70
36.00
27.80
38.40
Unit product cost
$69.30
$79.90
$78.60
$96.20
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
5.00
6.50
5.50
4.60
Selling price per unit
$77.30
$94.70
$88.60
$105.40
Variable selling cost per unit
$ 3.40
$ 2.40
$ 4.50
$ 2.80
Monthly demand in units
5,200
5,200
4,200
3,200
The grinding machines are potentially the constraint in the production facility. A total of 97,100 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 and final answer to 2 decimal places.)
Brown Corporation makes four products in a single facility. These products have the following unit product costs:
Explanation / Answer
PAY FOR ADDITIONAL UNITS = DIRECT MATERIAL + DIRECT LABOUR + VARIABLE MANUFACTURING OVERHEAD + VARIABLE SELLING COST PER UNIT
A B C D
DIRECT MATERIAL 15.5 11.4 12.2 11.8
DIRECT LABOUR 20.6 28.6 34.8 41.6
M.OVERHEAD 5.5 3.9 3.8 4.4
S.COST 3.4 2.4 4.5 2.8
TOTAL 45 46.3 55.3 60.6
PAY FOR 1 (45+46.3+55.3+60.6)/520
ADDITIONAL MINUTE = $0.40
(TOTAL COST/
ADDITIONAL MINUTE)
WORKINGS:-
GRINDING MINUTES REQUIRED = GRINDING MINUTES PER UNIT * MONTHLY DEMAND
A = 5*5200 = 26000
B = 6.5*5200 = 33800
C = 5.5*4200 = 23100
D = 4.6*3200 = 14720
TOTAL = 97620
MINUTES AVAILABLE = 97100
ADDITIONAL MINUTES REQUIRED = 97620 - 97100 = 520 MINUTES
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