Glocker Company makes three products in a single facility. These products have t
ID: 2488759 • Letter: G
Question
Glocker Company makes three products in a single facility. These products have the following unit product costs: The mixing machines are potentially the constraint in the production facility. A total of 9.170 minutes are available per month on these machines. Direct labor is a variable cost in this company. How many minutes of mixing machine time would be required to satisfy demand for all three products? 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 dollar amount.) 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.)Explanation / Answer
a) Total Minutes Require to satisfy the demand A B C Total Demand 2900 4200 2200 mixing minutes per unit 1.3 1.1 0.4 Minutes Required 3770 4620 880 9270 Total Minutes requires = 9270 b) Production of each product to Maximise the profit A B C Sales per unit 79.0 101.4 94.9 Variable Cost per unit Direct materials 34.9 51.4 57.8 Direct labour 22.3 24.9 15.7 Variable Manufactring Overhead 2.1 1.5 1.4 Variable selling exp 2.7 3.2 3.0 Total Varibale cost 62.0 81.0 77.9 Contribution per unit 17.0 20.4 17.0 Less:- Fixed Cost 12.0 7.6 8.2 Profit per unit 5.0 12.8 8.8 Contribution % 21.5% 20.1% 17.9% Fixed Cost total Exp Units 2900 4200 2200 Total Fixed cost per unit 12.0 7.6 8.2 Fixed Cost 34,800 31,920 18,040 84,760 We will make the production on the basis of higher contribution first, then second highest and so on A B C Production 2900 4200 1950 (C balancing unit in available time) Per unit time required 1.3 1.1 0.4 Time Avaiable- minutes 9170 5400 780 Time Required- minutes 3770 4620 780 Bal Time- minutes 5400 780 0 A B C Total Sales units 2900 4200 1950 Sales Value 229,100 425,880 185,055 840,035 Less:- Variable Cost 179,800 340,200 151,905 671,905 Contribution 49,300 85,680 33,150 168,130 Less:- Fixed Cost 84,760 Net operating income 83,370 c) Company Willing to pay one additional hour C units can be produced in one hour 150 (60/0.4) Sales Value 14,235 Less:- variable cost 11,685 Contribution 2,550 Additional that company can maximum pay for additional one hour 2,550
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