Redner,Inc Fixed Costs Are Applied to the Products on the Basis

question 90

Essay

Redner,Inc.produces three products.Data concerning the selling prices and unit costs of the three products appear below:

$\begin{array}{lccc} & & \text { Product } & \\& \mathrm{J} & \mathrm{K} & \mathrm{L} \\\text { Selling price } & \$ 80 & \$ 60 & \$ 90 \\\text { Variable costs } & 50 & 40 & 55 \\\text { Fixed costs } & 25 & 8 & 22 \\\text { Grinding machine time }&10 \mathrm{~min} . & 5 \mathrm{~min} & 7 \mathrm{~min} .\end{array}$

Fixed costs are applied to the products on the basis of direct labour hours.

Demand for the three products exceeds the company's productive capacity. The grinding machine is the constraint, with only 2,400 minutes of grinding machine time available this week.

Required:

a) Given the grinding machine constraint, which product should be emphasized? Support your answer with appropriate calculations.
b) If 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 grinding machine time?

---

Definitions:

Dividend Policy

A company's approach to distributing profits back to its shareholders, dictating how much to pay out as dividends and how often.

Alternate Dividend Policy

A strategy used by a company to vary its dividend payments to shareholders based on its earnings or investment opportunities.

Stock Dividend

A dividend payment made in the form of additional shares of the paying company's stock rather than cash.

Common Stock Account

An equity account that represents the ownership interest held by common shareholders in a corporation, including its value and dividends.