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 Direct materials Direct labor Variable manufacturing 35.20 51.70 58.10 22.60 25.20 16.00 $ 2.40 1.80 1.70 8.50 overhead 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 0.90 82.00 $104.40 97.90 3.50 1.20 0.30 3.00 3,200 4,500 3.30 2,500 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

a.

Total minutes required = 8640

b. Statement of contribution per minute

Statement of optimal production

c.

With one additional hour of mixing machine time, the company would have produced product A.

Contribution earned in that one additional hour would be $15.67

Hence the maximum amount that the company may be willing to pay for one additional hour of mixing time is $15.67

Maximum amount = $15.67

Product A B C Total Mixing minutes per unit 1.20 0.90 0.30 No. of units to be produced 3200 4500 2500 Total minutes required 3840 4050 750 8640

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