Kitchen Magician, Inc. has assembled the following data pertaining to its two mo
ID: 2512948 • Letter: K
Question
Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $22. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
Required:
If 70,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
With all other things constant, if management is able to reduce the direct material for an electric mixer to $17 per unit, how many units of each product should be manufactured? Purchased?
If 70,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
With all other things constant, if management is able to reduce the direct material for an electric mixer to $17 per unit, how many units of each product should be manufactured? Purchased?
Blender Electric Mixer Direct material $ 17 $ 26 Direct labor 10 38 Manufacturing overhead @ $44 per machine hour 44 88 Cost if purchased from an outside supplier 64 132 Annual demand (units) 33,000 38,000Explanation / Answer
1)
**machine hours available after manufacturing of blender = 70000-33000 = 37000 hours
2)
Bleder Electric Mixer Price 64 132 less:variable cost Direct material (17) (26) direct labor (10) (38) variable overhead (22) [44-22fixed) (44) [88-(22*2)fixed] contribution margin per unit 15 24 machine hour per unit 44/44 =1 88/44=2 contribution pER HOUR 15/1= $15 24/2 =$ 12 Ranking 1 2Related Questions
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