Broze Company makes four products in a single facility. These products have the
ID: 2599209 • Letter: B
Question
Broze Company makes four products in a single facility. These products have the following unit product costs:
Products
26.20
34.50
26.30
36.90
$63.30
$73.90
$72.60
$90.20
Products
The grinding machines are potentially the constraint in the production facility. A total of 50,400 minutes are available per month on these machines.
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 and final answer to 2 decimal places.)
$12.70
$15.90
$4.73
$9.45
Broze Company makes four products in a single facility. These products have the following unit product costs:
Explanation / Answer
Ans) Option (D) $9.45
A B C D
Selling price per unit ........... 75.8 93.2 87.1 103.9
Direct materials ................. 14 9.9 10.7 10.3
Direct labor ..................... 19.1 27.1 33.3 40.1
Variable manufacturing overhead .. 4 2.4 2.3 2.9
Variable selling cost per unit ... 1.9 0.9 3.0 1.3
Total variable cost per unit . 39 40.3 49.3 54.6
Contribution margin per unit ..... 36.8 52.9 37.8 49.3
Grinding minutes per unit .......... 3.5 5 4 3.1
Contribution margin per minute ... 10.51 10.58 9.45 15.9
Rank in terms of profitability ... 3 2 4 1
Optimal production 3700 3700 2490 2900
Grinding minutes
Product D 2900 X 3.1 = 8990
Product B = 3700 X 5 = 18500
Product A = 3700 x 3.5 = 12950
Total minutes = 40440
Units Left for Product C = 50400 - 40440 = 9960
Units of product C = 9960 / 4 = 2490
The company should be willing to pay up to the contributionmargin per minute for the marginal job, which is 9.45
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