Question

1. Cranston Corporation makes four products in a single facility. Data concerning these products appear below:

	Products
	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
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 potentially the constraint in the production facility. A total of 28,200 minutes are available per month on these machines.

How many minutes of milling machine time would be required to satisfy demand for all four products?

Multiple Choice

• 11,000

• 28,200

• 23,500

• 31,400

2. Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79.

What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

Multiple Choice

• $1 per batch

• ($17) per batch

• $19 per batch

• ($52) per batch

Answer 1

Q1.
			Product A	Product B	Product C	Product D	Total
Maimum demand in units	1000	4000	3000	3000
Multiply: Mins required per unit	3.3	4.1	2.6	1.3
Total minutes of milling machine required	3300	16400	7800	3900	31400
Answer is 31400
Q2.
Incremental analysis:
Revenue after further processing	79
Revenue at splitt of point of Beet Juice	32
Incremental revenue				47
Less: Incremental cost			28
Incremental income (loss)			19
Answer is $ 19 per batch