Use the Table Below to Answer the Following Question(s)

question 57

Multiple Choice

Use the table below to answer the following question(s) .
Remington Textiles has a mill that produces three types of fabrics on a make-to-order basis.The mill operates on a 24/7 basis.The key decision facing the plant manager is about the type of loom needed to process each fabric during the coming 12 weeks to meet demands for the three fabrics and not exceed the capacity of the looms in the mill.Two types of looms are used: Jaquard and Northrop.Jaquard looms can be used to make all fabrics and are the only looms that can weave certain fabrics, such as plaids.Demands, variable costs for each fabric, and production rates on the looms are given in the table below.The mill has 10 Northrop looms and 2 Jaquard looms.Any fabrics that cannot be woven in the mill because of limited capacity will be purchased from an external supplier, finished at the mill, and sold at the selling price.In addition to determining which looms to use to process the fabrics, the manager also needs to determine which fabrics to buy externally.

Answer the following questions using a linear optimization model.
-From the Sensitivity Report, what amount (cost/hour) would make it feasible to purchase Fabric 2 rather than produce it?

• A)$0.6
• B)$0.25
• C)$0.128
• D)$1.1

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Definitions:

Variable Costing

A method of costing that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct labor, direct materials, and overhead - in the cost of a product.

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest.

Fixed Manufacturing Overhead

The total of all production costs that do not change with the level of production output, such as salaries of managers, rent, and property taxes.