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.)

---

Definitions:

Covariance

A measure that indicates the degree to which two variables change together. If the variables tend to show similar behavior, the covariance is positive; if they show opposite behavior, the covariance is negative.

Standard Deviation

A system for measuring the degree of difference or spread in a set of figures.

Scatterplot

A graphical representation of two variables on a set of Cartesian coordinates to investigate the relationship between them.

Independent Variable

An experimental or study factor that is altered to determine its impact on a variable that depends on it.