Glocker Company Makes Three Products in a Single Facility $\quad$

question 54

Essay

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

$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Products }$
$\begin{array}{lrrr}&A&B&C\\\text { Direct materials } & \$ 10.90 & \$ 15.80 & \$ 8.00 \\\text { Direct labour } & 12.50 & 12.60 & 9.90 \\\text { Variable manufacturing overhead } & 2.40 & 1.20 & 1.40 \\\text { Fixed manufacturing overhead } & 11.60 & 7.20 & \underline{7.80}\\\text { Unit product cost }&\$ 37.40 & \$ 36.80 & \$ 27.10\end{array}$ Additional data concerning these products are listed below. $\begin{array}{lccc}& & { \text { Products } } \\& \text { A } & \text { B } & \text { C } \\\text { Mixing minutes per unit } & 2.00 & 1.00 & 0.50 \\\text { Selling price per unit } & \$ 55.80 & \$ 54.60 & \$ 43.10 \\\text { Variable selling cost per unit } & \$ 2.10 & \$ 1.40 & \$ 1.90 \\\text { Monthly demand in units } & 2,000 & 1,000 & 3,000\end{array}$

The mixing machines are potentially a constraint in the production facility. A total of 5,900 minutes are available per month on these machines.

Direct labour is a variable cost in this company.

Required:

a) How many minutes of mixing machine time would be required to satisfy demand for all four products?
b) How much of each product should be produced, rounded to the nearest whole unit, to maximize operating income
c) Up to how much should the company be willing to pay, rounded to the nearest whole cent, for one additional minute of mixing machine time if the company has made the best use of the existing mixing machine capacity?

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Definitions:

Part Performance

An equitable doctrine allowing a court to enforce an oral contract, despite statutory requirements for it to be in writing, based on actions taken in reliance on the contract.

Land

The surface of the earth, extending downward to the center and upward indefinitely into the airspace, including natural resources and physical features.

Acceptable

Deemed satisfactory or permissible by a given standard or authority.

Acreage

The measurement of land area in acres, often used in real estate and land management.