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Item Skipped Item 10 Assume a company makes four products (A, B, C, and D) in a single facility. Data concerning these products appear below: Product A Product B Product C Product D Selling price per unit $ 42.30 $ 50.00 $ 37.60 $ 33.50 Variable manufacturing cost per unit $ 20.80 $ 30.70 $ 21.00 $ 19.90 Variable selling cost per unit $ 2.70 $ 2.10 $ 1.00 $ 2.40 Milling machine minutes per unit 3.30 4.10 2.60 1.30 Monthly demand in units 1,000 4,000 3,000 3,000 The milling machines are the constraint in the production facility. A total of 14,000 minutes is available per month on these machines. Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity

Sagot :

anthougo

Answer:

The company should be willing to pay less than $4.20 for one additional minute of milling machine time.

Explanation:

a) Data and Calculations:

                                                              Product  Product  Product  Product                                                                

                                                                    A            B             C            D

Selling price per unit                            $42.30   $50.00   $37.60  $33.50

Variable manufacturing cost per unit $20.80   $30.70    $21.00   $19.90

Variable selling cost per unit                 $2.70     $2.10       $1.00    $2.40

Total variable costs per unit               $23.50   $32.80   $22,00  $22.30

Contribution per unit                           $18.80    $17.20    $15.60    $11.20

Milling machine minutes per unit           3.30        4.10        2.60        1.30

Contribution per minute                       $5.70     $4.20     $6.00     $8.62

Monthly demand in units                      1,000     4,000      3,000    3,000

Minutes required                                 3,300    16,400       7,800    3,900

Best use of existing minutes              2,300          0          7,800    3,900

Additional minutes required               1,000     16,400       0           0

Total minutes required = 31,400

Minutes available =          14,000

Minutes to buy =              17,400

Lost contribution from:

Product A = (1,000 * $5.70 =    $5,700

Product B = (16,400 * $4.20 = 68,880

Total lost contribution          $74,580

Required time to produce lost contribution = 17,400

Estimated to pay for additional minute = $4.29 ($74,580/17,400)

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