b. How much of each product should be produced to maximize net operating outcome
ID: 2469162 • Letter: B
Question
b. How much of each product should be produced to maximize net operating outcome?
c. Up to how much should the comanpy be willing to pay for one addiitional hour of mixing machine time if the company has made the best use of the existing mixing machine property?
Holt Company makes three products in a single facility. Data concerning these products follow: Products Direct materials Direct labor. Variable manufacturing overhead. Variable selling cost per unit $67.90 $57.70 $43.90 $12.10 $10.30 $8.60 $14.10 $8.00 $6.80 $2.60$2.20 $1.80 $2.50 $2.20 $2.50 4.70 3,000 3,000 2.70 1,000 3.30 Monthly demand in units. The mixing machines are potentially the constraint in the production facility. A total of 25,800 minutes are available per month on these machines Direct labor is a variable cost in this company Required:Explanation / Answer
Products A B C Mixing Minutes per unit 2.7 3.3 4.7 Demand in Units 1000 3000 3000 Total Mixing Minutes required 2700 9900 14100 A B C Selling price per unit 67.9 57.7 43.9 Direct Material 12.1 10.3 8.6 Direct Labor 14.1 8 6.8 Variable Manufacturing Overhead 2.6 2.2 1.8 variable Selling cost 2.5 2.2 2.5 Total Cost 31.3 22.7 19.7 Contribution per unit 36.6 35 24.2 Mixing Minutes 2.7 3.3 4.7 Contribution per mixing minutes 13.55 10.6 5.15 Ranking I II III Product Units Minutes A 1000 2700 b 3000 9900 c 2808 13200 25800
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