Joe Green Enterprises Has Met All Production Requirements for the Current

question 56

Essay

Joe Green Enterprises has met all production requirements for the current month and has an opportunity to produce additional units of product with its excess capacity. Unit selling prices and costs for three models of one of its product lines are as follows: Variable overhead is charged to products on the basis of direct labor dollars, and fixed overhead is charged to products on the basis of machine hours.
Required:
1. If Joe Green Enterprises has excess machine capacity and can add more labor as needed (that is, neither machine capacity nor labor is a constraint), the excess production capacity should be devoted to producing which product or products? (Show calculations.)
2. If Joe Green Enterprises has excess machine capacity but a limited amount of labor time, the production capacity should be devoted to producing which product or products?

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Definitions:

Finished Goods

Products that have completed the manufacturing process and are ready to be sold to customers.

Selling and Admin. Expense

Costs that are not directly tied to the production of goods or services but are necessary for selling products and managing the business.

Variable Expense

Costs that vary directly with the level of production or sales volume, such as raw materials and commission fees.

Finished Goods Inventory

The inventory of finished goods available for sale but still awaiting purchase by consumers.