Glocker Company makes three products in a single facility. These products have t

Question

Glocker Company makes three products in a single facility. These products have the following unit product costs Product $ 35.20 $ 51.70 58.10 $ 22.60 25.20 $ 16.00 Variable manufacturing overhead $ 2.40 $ 1.80 1.70 8.50 Direct materials Direct labor Fixed manufacturing overhead 12.30 7.90 Unit product cost $72.50 $86.60 $84.30 Additional data concerning these products are listed below. Mixing minutes per unit Selling price per unit Variable selling cost per unit Monthly demand in units 1.20 0.90 0.30 $ 82.00 $104.40 $ 97.90 $ 3.00 $ 3.50 $ 3.30 2,500 3,200 4,500 The mixing machines are potentially the constraint in the production facility. A total of 8,540 minutes are available per month on these machines. Direct labor is a variable cost in this company

Explanation / Answer

SOLUTION

(A)

Total time required for all products: 3,840 + 4,050 + 750 = 8,640

(B)

(C) The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $5.64.

Product A Product B Product C Mixing minutes per unit (A) 1.20 0.90 0.30 Monthly demand in units (B) 3,200 4,500 2,500 Total minutes required (A*B) 3,840 4,050 750

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