Question

Bruce Corporation makes four products in a single facility. These products have the following unit product...

Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products A B C D Direct materials $ 14.50 $ 10.40 $ 11.20 $ 10.80 Direct labor 19.60 27.60 33.80 40.60 Variable manufacturing overhead 4.50 2.90 2.80 3.40 Fixed manufacturing overhead 26.70 35.00 26.80 37.40 Unit product cost 65.30 75.90 74.60 92.20 Additional data concerning these products are listed below. Products A B C D Grinding minutes per unit 4.00 5.50 4.50 3.60 Selling price per unit $ 76.30 $ 93.70 $ 87.60 $ 104.40 Variable selling cost per unit $ 2.40 $ 1.40 $ 3.50 $ 1.80 Monthly demand in units 4,200 4,200 3,200 2,200 The grinding machines are potentially the constraint in the production facility. A total of 61,900 minutes are available per month on these machines. Direct labor is a variable cost in this company. 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 to 2 decimal places.)

Homework Answers

Answer #1
Product A Product B Product C Product D
Selling price $76.30 $93.70 $87.60 $104.40
Less: Variable costs:
Direct material 14.50 10.40 11.20 10.80
Direct labor 19.60 27.60 33.80 40.60
Variable manufacturing overhead 4.50 2.90 2.80 3.40
Variable selling cost 2.40 1.40 3.50 1.80
Total variable costs 41 42.3 51.3 56.6
Contribution margin per unit 35.3 51.4 36.3 47.8
Grinding minutes per unit 4 5.50 4.50 3.60
Contribution margin per grinding minute $8.83 $9.35 $8.07 $13.28
Total Minutes required Total Minutes available
Product D (2,200*3.60) 7,920 7,920
Product B (4,200*5.50) 23,100 23,100
Product A (4,200*4) 16,800 16,800
Product C (3,200*4.50) 14,400 14,080 (61,900-47,820)
Total 62,220 61,900

Hence, as per above results since Product C requires additional minutes the company shall be willing to pay for one additional grinding minute is $8.07

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