Glover Company makes three products in a single facility with the following info
ID: 2529940 • Letter: G
Question
Glover Company makes three products in a single facility with the following information:
A
B
C
Selling Price per unit
$85.00
$97.00
$91.00
Direct Materials
16.00
11.00
14.00
Direct Labor
19.00
17.00
20.00
Variable Manufacturing
3.0
2.5
4.0
Fixed Manufacturing
22.00
24.00
30.00
Variable Selling Cost
3.00
2.50
1.90
Mixing Minutes / Unit
4.0
2.5
3.0
Monthly demand (units)
1,500
2,000
500
**The company only has 10,500 minutes available per month to mix these products**
Calculate the contribution margin per unit
How much of each of these products should be produced to maximized net operating income, and what would the total contribution margin equal?
A
B
C
Selling Price per unit
$85.00
$97.00
$91.00
Direct Materials
16.00
11.00
14.00
Direct Labor
19.00
17.00
20.00
Variable Manufacturing
3.0
2.5
4.0
Fixed Manufacturing
22.00
24.00
30.00
Variable Selling Cost
3.00
2.50
1.90
Mixing Minutes / Unit
4.0
2.5
3.0
Monthly demand (units)
1,500
2,000
500
Explanation / Answer
A B C Sales A 85.00 97.00 91.00 Variable costs Direct materials 16.00 11.00 14.00 Direct Labor 19.00 17.00 20.00 Variable Manufacturing 3.00 2.50 4.00 Variable selling costs 3.00 2.50 1.90 Total Variable cost B 41.00 33.00 39.90 Contribution Margin per unit C=A-B 44.00 64.00 51.10 Mixing minutes per unit D 4.00 2.50 3.00 Contribution Margin per minute E=C/D 11.00 25.60 17.03 Ranking III I II (based on Contribution Margin per minute) Monthly Demand (Units) F 1,500 2,000 500 Hours Required G=FXD 6,000 5,000 1,500 Hours allocated based on ranking H 4,000 5,000 1,500 Maximum available minutes per month is 10500 minutes Units to be production to maximise net operating income I =H/D 1,000 2,000 500 Comtribution J =I X C 44,000 128,000 25,550 Total Contribution Margin 197,550
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