Question

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

	Products
	A		B		C		D
Direct materials	$	16.90	$	20.80	$	13.80	$	16.50
Direct labor		18.90		22.30		16.70		10.70
Variable manufacturing overhead		5.70		6.90		9.40		6.40
Fixed manufacturing overhead		28.80		15.70		15.80		17.80
Unit product cost		70.30		65.70		55.70		51.40

Additional data concerning these products are listed below.

	Products
	A		B		C		D
Grinding minutes per unit		2.10		1.15		0.70		1.00
Selling price per unit	$	85.20	$	77.60	$	74.40	$	69.10
Variable selling cost per unit	$	2.65	$	3.35	$	4.10	$	4.80
Monthly demand in units	4,300		3,300		3,300		5,300

The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Which product makes the MOST profitable use of the grinding machines? (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-09-13

Multiple Choice

Product D

Product A

Product C

Product B

Answer 1

	A	B	C	D
DM	16.90	20.80	13.80	16.50
DL	18.90	22.30	16.70	10.70
V. mfr OH	5.70	6.90	9.40	6.40
V.selling cost	2.65	3.35	4.10	4.80
Variable cost pu (A)	44.15	53.35	44	38.4
SP pu (B)	85.20	77.60	74.40	69.10
Contribution pu (C =B-A)	41.05	24.25	30.4	30.7
Grinding minutes pu (D)	2.10	1.15	0.70	1
Contribution per griding minute (C/D)	19.54	21.09	43.43	30.7
Ranking	4th	3rd	1st	2nd

Product C makes most profitable use of grinding machine