31. (Maximum Grade: 5.0 points-Suggested Time: 5.0 minutes) The production super

Question

31. (Maximum Grade: 5.0 points-Suggested Time: 5.0 minutes) The production supervisor has just advised that to complete this special order, production and sales of 500 units of an existing product, which is sold for $35.00 per unit and has a variable cost of $23 per unit, will have to be sacrificed. The minimum (floor) total price that Fox Company should charge for this order is: a. $15,000 b. $30,000 c. $38,000 d. $44,000 32. (Maximum Grade: 5.0 points Suggested Time: 5.0 minutes) Scotty Company produces three products with the following characteristics Maximum Unit Sales Price per Unit Variable Cost per Unit Machine time (minutes) per unit 10,000 8,000 6,000 $10.00 $15.00 $22.00 ire per unt 12 Production is constrained by machine time and there are 1,000 hours (60,000 minutes) of machine time available. The most profitable production plan is: a. 10,000 A, 8,000 B, 6,000C b. 7,000 A, 8,000 B, 6,000 c. 10,000 A,8,000 B,4800 C d. None of the above

Explanation / Answer

a) Loss of profit = 500* (35-23)= 6000

Hence, minimum floor price is 32000+6000=38000

b) Proft/Unit/Per minute of time for the 3 products is

A - (10-4)/2=3

B-(15-7)/2=4

C- (22-12)/5=2

First priority should be to complete max units of B,A and C in that order

B - 8000 units - 16000 minutes

A - 10000 units - 20000 minutes

For C, we have 24000 minutes remaining. Hence, units completed=24000/5=4800

Hence, C is the correct answer.

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