Pearl, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Product F Product G Product H Selling price................................... $50 $80 $70 Variable costs................................ $40 $50 $55 Fixed costs..................................... $15 $20 $12 Milling machine time (minutes).... 4 2 5 Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,400 minutes of milling machine time available this week. Required: Given the milling machine constraint, which product should be emphasized? Support your answer with appropriate calculations. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of milling machine time?
Pearl, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Product F Product G Product H Selling price................................... $50 $80 $70 Variable costs................................ $40 $50 $55 Fixed costs..................................... $15 $20 $12 Milling machine time (minutes).... 4 2 5 Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,400 minutes of milling machine time available this week. Required: Given the milling machine constraint, which product should be emphasized? Support your answer with appropriate calculations. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of milling machine time?
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter12: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 12.16E: Product cost concept of product pricing Based on the data presented in Exercise 12-15, assume that...
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4.) Pearl, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:
|
|
|
Product F |
Product G |
Product H |
|
|
Selling price................................... |
$50 |
$80 |
$70 |
|
|
Variable costs................................ |
$40 |
$50 |
$55 |
|
|
Fixed costs..................................... |
$15 |
$20 |
$12 |
|
|
Milling machine time (minutes).... |
4 |
2 |
5 |
Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2,400 minutes of milling machine time available this week.
Required:
- Given the milling machine constraint, which product should be emphasized? Support your answer with appropriate calculations.
- Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of milling machine time?
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