Question

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

 Brown Corporation makes four products in a single facility. These products have the following unit product costs:
 Products A B C D Direct materials \$17.30 \$21.20 \$14.20 \$16.90 Direct labor 19.30 22.70 17.10 11.10 Variable manufacturing overhead 6.10 7.30 9.80 6.80 Fixed manufacturing overhead 29.20 16.10 16.20 18.20 Unit product cost \$71.90 \$67.30 \$57.30 \$53.00

Additional data concerning these products are listed below.

 Products A B C D Grinding minutes per unit 2.30 1.35 0.90 1.20 Selling price per unit \$87.20 \$79.60 \$76.40 \$71.10 Variable selling cost per unit \$3.05 \$3.75 \$4.50 \$5.20 Monthly demand in units 4,700 3,700 3,700 5,700.00
 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?

Product A

Product B

Product D

Product C

Calculate contribution margin per machine minute:

 Product A Product B Product C Product D Selling price per unit 87.20 79.60 76.40 71.10 Direct material per unit 17.30 21.20 14.20 16.90 Direct labour per unit 19.30 22.70 17.10 11.10 Variable manufacturing overhead 6.10 7.30 9.80 6.80 Variable selling cost per unit 3.05 3.75 4.50 5.20 Contribution margin per unit 41.45 24.65 30.80 31.10 Grinding minutes per unit 2.30 1.35 0.90 1.20 Contribution margin per minute 18.02 18.30 34.2 25.9 Rank 4 3 1 2

So answer is d) Product C

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