Grown Corporation makes four products in a single facility. These products have the following unit product costs: A B C D Direct materials $15.60 $19.50 $12.50 $15.20 direct labour $17.60 $21 $15.40 $9.40 variable manufacturing overhead $4.40 $5.60 $8.10 $5.10 fixed manufacturing overhead $27.50 $14.40 $14.50 $16.50 unit product cost $65.10 $60.50 $50.50 $46.20 Additional data concerning these products are listed below. A B C D Grinding minutes per unit 2 1.10 0.7 0.3 selling price per unit $78.70 $71.10 $67.90 $62.60 variable selling cost per unit $2.60 $3.10 $2.80 $3.50 monthly demand in units 3,000 2,000 2,000 4,000 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. Required: I. Derive the total number of minutes of grinding machine time would be required to satisfy demand for all 4 products. II. Which product makes the LEAST profitable use of the grinding machines? III. Which product makes the MOST profitable use of the grinding machines?
Grown Corporation makes four products in a single facility. These products have the following unit product costs: A B C D Direct materials $15.60 $19.50 $12.50 $15.20 direct labour $17.60 $21 $15.40 $9.40 variable manufacturing overhead $4.40 $5.60 $8.10 $5.10 fixed manufacturing overhead $27.50 $14.40 $14.50 $16.50 unit product cost $65.10 $60.50 $50.50 $46.20 Additional data concerning these products are listed below. A B C D Grinding minutes per unit 2 1.10 0.7 0.3 selling price per unit $78.70 $71.10 $67.90 $62.60 variable selling cost per unit $2.60 $3.10 $2.80 $3.50 monthly demand in units 3,000 2,000 2,000 4,000 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. Required: I. Derive the total number of minutes of grinding machine time would be required to satisfy demand for all 4 products. II. Which product makes the LEAST profitable use of the grinding machines? III. Which product makes the MOST profitable use of the grinding machines?
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...
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Question
Grown Corporation makes four products in a single facility. These products have the following unit product costs:
| A | B | C | D | |
| Direct materials | $15.60 | $19.50 | $12.50 | $15.20 |
| direct labour | $17.60 | $21 | $15.40 | $9.40 |
| variable manufacturing overhead | $4.40 | $5.60 | $8.10 | $5.10 |
| fixed manufacturing overhead | $27.50 | $14.40 | $14.50 | $16.50 |
| unit product cost | $65.10 | $60.50 | $50.50 | $46.20 |
Additional data concerning these products are listed below.
| A | B | C | D | |
| Grinding minutes per unit | 2 | 1.10 | 0.7 | 0.3 |
| selling price per unit | $78.70 | $71.10 | $67.90 | $62.60 |
| variable selling cost per unit | $2.60 | $3.10 | $2.80 | $3.50 |
| monthly demand in units | 3,000 | 2,000 | 2,000 | 4,000 |
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.
Required:
I. Derive the total number of minutes of grinding machine time would be
required to satisfy demand for all 4 products.
II. Which product makes the LEAST profitable use of the grinding machines?
III. Which product makes the MOST profitable use of the grinding machines?
IV. Up to how much should the company be willing to pay for 1 additional
minute of grinding machine time if the company has made the best use of
the existing grinding machine capacity?
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