Topic: Final project ques! × ? Assignments: SP18: INT/X , ?r, Connect Elfalan Co

Question

Topic: Final project ques! × ? Assignments: SP18: INT/X , ?r, Connect Elfalan Corporation Proc × ? © Search Textbook Solutio Secure | https://n Chapter 12 Quiz Saved Help Save& Exit Submit Holton Company makes three products in a single facility. Data concerning these products follow 10 Product selling price Direct materials Direct labor Variable manufacturing overhead Variable selling cost per unit Mixing minutes per unit Monthly demand in units per unit $131.28 $73.1 $152.60 $57.18 $40.7 $91.70 $ 41.1 $13.0e27.70 $ 7.80 4.2 12.90 $ 15.30 3.0e7.90 4,00 3,000 1,000 2,08e 27.18 4.0e The mixing machines are potentially the constraint in the production facility. A total of 14,000 minutes are available per month on these machines Direct labor is a variable cost in this company. Required a. How many minutes of mixing machine time would be required to satisfy demand for all three products? b. How much of each product should be produced to maximize net operating income? c. 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? Complete this question by entering your answers in the tabs below Required A Required B Required C Mc

Explanation / Answer

A) Required minutes to satisfy the demand of all three products

A - 3000 units * 27.10 mixing minutes per unit = 81300 minutes

B- 1000 units * 4 mixing minutes per unit = 4000 minutes

c- 2000 units * 2 mixing minutes per unit = 8000 minutes

TOTAL no of minutes required to satisfy demand of all three products = 81300+4000+8000 = 93,300 minutes

2)

Product c = 12.4 *8000 = 99200

3)
Constraint = Maximum capacity = 14000

c. 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?

No more than the lowest amount of contribution margin. Since the lowest amount is $ 9.9
minute, the company should not pay more than $9.9 X 60 = $ 594

A B C Selling price 131.2 73.1 152.6 Less Direct material 57.1 40.7 91.7 Direct labour 41.1 13 27.7 variable manf OH 7.8 4.2 12.9 Variable selling OH 15.3 3 7.9 Contribution 9.9 12.2 12.4 Contribution per minute 0.365314 3.05 3.1 Ranking III II I Limiting factor = Mixing minutes per unit From the above data we can see that contributuin margin is higher in product B and Product C Also Time taken to produce one unit is lower when compared to product A i.e., 4 minutes per unit There fore with available 14000 minutes To produce 4000 units of C = 8000 minutes To produce 4000 units of B = 4000 minutes    Remaining minutes available = 14000-8000-4000 = 2000 minutes With available 2000 units we can produce 2000/27.10 = 74 units Maximum profit with optimal production product A = 74*9.9 = $ 732.6 Product B = 4000*12.2 = 48800

Product c = 12.4 *8000 = 99200

3)
Constraint = Maximum capacity = 14000

c. 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?

No more than the lowest amount of contribution margin. Since the lowest amount is $ 9.9
minute, the company should not pay more than $9.9 X 60 = $ 594

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