Varix Company Makes Three Products in a Single Facility The Mixing Machines Are Potentially the Constraint in the Production

question 130

Essay

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

Additional data concerning these products are listed below.
$$\begin{array} { l r r r } & &{ \text { Product } } \\& \text { A } & \text { B } &\mathrm { C } \\\text { Mixing minutes per unit } & 3.70& 3.4 0 & 3.90 \\\text { Selling price per unit } & \$ 59.20& \$ 60.10 & \$ 55.30 \\\text { Variable selling cost per unit } & \$ 2.90 & \$ 2.70 & \$ 3.70 \\\text { Monthly demarnd in units } & 2,000 & 4,000 & 2,000\end{array}$$
The mixing machines are potentially the constraint in the production facility. A total of 24,200 minutes is available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for all three products?
b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.)

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Definitions:

Confused

A state of being bewildered or unclear in one’s mind about something.

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Experiencing anxiety, sorrow, or pain; often used to describe situations, individuals, or assets under severe stress.

Peripheral Vision

That portion of vision that occurs outside the very center of gaze, allowing humans to detect movement and shapes not in the direct line of sight.

Sclera

The white or sclerotic outer coat of the eye.