Bruce Corporation makes four products in a single facility. These products have

Question

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

Additional data concerning these products are listed below.

The grinding machines are potentially the constraint in the production facility. A total of 68,100 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round your intermediate calculations to 2 decimal places.) 1_04_2014_QC_58425, 11_17_2014_QC_58425,Garrison 16e Rechecks 2017-09-13

Multiple Choice

$12.42

$3.80

$7.60

$10.36

Products A B C D Direct materials $ 14.70 $ 10.60 $ 11.40 $ 11.00 Direct labor 19.80 27.80 34.00 40.80 Variable manufacturing overhead 4.70 3.10 3.00 3.60 Fixed manufacturing overhead 26.90 35.20 27.00 37.60 Unit product cost 66.10 76.70 75.40 93.00

Explanation / Answer

Products A B C D Selling price per unit $76.50 93.9 87.8 104.6 Less: Variable cost Direct materials 14.7 10.6 11.4 11 Direct labor 19.8 27.8 34 40.8 Variable manufacturing overhead 4.7 3.1 3 3.6 Variable selling cost 2.6 1.6 3.7 2 Total variable cost 41.8 43.1 52.1 57.4 Contribution margin per unit $34.70 $50.80 $35.70 $47.20 Grinding minute required per unit G 4.2 5.7 4.7 3.8 Contribution margin per minute $8.26 $8.91 $7.60 $12.42 ranking 3 2 4 1 Month demand D 4400 4400 3400 2400 Total minutes required G*D 18480 25080 15980 9120 68660 Total available 68100 So the prodyuct produced 4400 4400 and remaining 2400 for it So additional price that can be paid is for the product C as hours for it are less available it is the contribution margin per minute for product C So option C is correct $7.6 If any doubt please comment. If satisfied you can rate the answer

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