Garson, Inc. produces three products. Data concerning the selling prices and uni
ID: 2533786 • Letter: G
Question
Garson, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:
Fixed costs are applied to the products on the basis of direct labor hours.
Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,600 minutes of milling machine time available this week.
Required:
a. Given the milling machine constraint, what should the company focus on to make the production decision?
b. Based on your answer to part (a), calculate that amount for each product.
c. Which product should be emphasized?
Product F G H Selling price $ 55 $ 35 $ 65 Variable costs $ 40 $ 30 $ 45 Fixed costs $ 15 $ 4 $ 12 Milling machine time (minutes) 10 2 4Explanation / Answer
a F G H Selling price 55 35 65 Less: Variable costs 40 30 45 Unit contribution margin 15 5 20 Milling machine time (minutes) 10 2 4 Contribution margin per minute 1.5 2.5 5 Product H should be emphasized b Amount paid for an additional hour = 5*60 = $300 per hour
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