A) Compute how many minuts of mixing machine time would be required to satisfy d
ID: 2480358 • Letter: A
Question
A) Compute how many minuts of mixing machine time would be required to satisfy demand for each of the three products.
B) Compute how many units of each product should be produced to maximize net operating income. ( round off to the nearest whole unit)
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Rebus Company makes three products in a single facility. Data concerning these products follow Product:s Selling price per unit Direct materials Direct labor Variable manufacturing overhead. Variable selling cost per unit.... $70.00 $92.40 $85.90 $34.00 $50.50 $56.90 $21.40 $24.00 $14.80 $1.20$0.60$0.50 $1.80 $2.30$2.10 0.80 4,000 1.20 2,000 0.40 2,000 Monthlv demand in units The mixing machines are potentially the constraint in the production facility. A total of 6,300 minutes are available per month on these machines. Direct labor is a variable cost in this companyExplanation / Answer
A. The calculation of total for mixing machine required to satisfy demand of each product is as under: Products A B C Minutes for mixing machine required per unit 1.20 0.80 0.40 Monthly demands in units 2,000 4,000 2,000 Total minutes for mixing machine for monthly demands 2,400 3,200 800 Total minutes for mixing machine for monthly demands for products is calculated by multiplying monthly demands in units with minutes required for mixing machine per unit. B. The minutes for mixing machine is in constraint therefore the contribution margin per minute of machine mixing for each product is calculated as under: The higher contribution margin per minute will be produced more to maximize the operating income. Products A B C Selling price per unit $ 70.00 $ 92.40 $ 85.90 Less: Variable cost per unit Direct material $ 34.00 $50.50 $ 56.90 Direct labor $21.40 $ 24.00 $ 14.80 Variable Mnf. overhead $ 1.20 $ 0.60 $ 0.50 Variable selling cost per unit $ 1.80 $ 2.30 $ 2.10 Contribution margin per unit $ 11.60 $ 15.00 $ 11.60 Minutes for mixing machine per unit 1.2 0.8 0.4 Contribution margin per minute for mixing machine $ 9.67 $ 18.75 $ 29.00 The contribution margin per minute for mixing machine of product C is highest therefore the maximum number of units of product C should be produced first and then with remaining minutes for mixing machine should be used for producing product B to the maximum demand of the product. Even after usage of minutes for producing product C and B if the minutes available should be used for producing product A. Demand in units Minutes for mixing machine Contribution margin per minute Total contribution margin Total minutes available 6,300 Product C (0.40 minutes per unit) 2,000 800 $ 29.00 $ 23,200 Product B (0.80 minutes per unit) 4,000 3200 $ 18.75 $ 60,000 Remaining minutes 2,300 Used for production of product A (1.2 minutes per unit) 1,916 2300 $ 9.67 $ 22,233 Total units and contribution margin 7,916 $ 105,433 After consuming total minutes for mixing machine for producing product C and product B the remaing minutes of 2,300 (6,300-800-3,200) will be used for producing product A (which requires 1.2 minutes per unit) therefore the total units produced from 2,300 minutes would be (2,300/1.2)=1,916 units.
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