Question

# Bacon Company makes four products in a single facility. These products have the following unit product...

Bacon Company makes four products in a single facility. These products have the following unit product costs:

 Products A B C D Direct materials \$ 15.00 \$ 10.90 \$ 11.70 \$ 11.30 Direct labor 20.10 28.10 34.30 41.10 Variable manufacturing overhead 5.00 3.40 3.30 3.90 Fixed manufacturing overhead 27.20 35.50 27.30 37.90 Unit product cost \$ 67.30 \$ 77.90 \$ 76.60 \$ 94.20

Additional data concerning these products are listed below.

 Products A B C D Grinding minutes per unit 3.80 5.30 4.30 3.40 Selling price per unit \$ 76.80 \$ 94.20 \$ 88.10 \$ 104.90 Variable selling cost per unit \$ 2.90 \$ 1.90 \$ 4.00 \$ 2.30 Monthly demand in units 4,280 4,280 3,280 2,280

The grinding machines are the constraint in the production facility. A total of 55,000 minutes is 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 off to the nearest whole cent.)

8.09?

8.12?

11.88?

36.04?

 Particulars Product A Product B Product C Product D Selling price per unit 76.8 94.2 88.1 104.9 Less: Variable cost Direct Materials Costs 15 10.9 11.7 11.3 Direct labor Costs 20.1 28.1 34.3 41.4 Variable Manufacturing overhead 5 3.4 3.3 3.9 Variable Selling Cost per unit 2.9 1.9 4 2.3 Contribution margin per unit 33.8 49.9 34.8 46 / Grinding minutes per unit 3.8 5.3 4.3 3.4 Contribution per minute 8.89 9.42 8.09 13.53 Ranking III II IV I Company Willing to pay for best use = \$ 8.09 Option (a) is Correct

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