Fowler Industries Produces Two Bearings: C15 and C19 The Company Requires 8,000 Units of C15 and 11,000 Units

question 20

Essay

Fowler Industries produces two bearings: C15 and C19. Data regarding these two bearings follow. $\begin{array} { | l | r | r | } \hline & \mathrm { C } 15 & \mathrm { C19 } \\\hline \text { Machine hours required per unit } & 2.00 & 2.50 \\\hline \text { Standard cost per unit: } & & \\\hline \text { Direct material } & \$ 2.50 & \$ 4.00 \\\hline \text { Direct labour } & 5.00 & 4.00 \\\hline \text { Manufacturing overhead: } & & \\\hline \begin{array} { l } \text { Variable (Applied on the basis of direct labour } \\\text { hours) }\end{array} & 3.00 & 2.50 \\\hline \text { Fixed (Applied on the basis of machine hours) } & 4.00 & 5.00 \\\hline \text { Total } & \$ 14.50 & \$ 15.50 \\\hline\end{array}$ The company requires 8,000 units of C15 and 11,000 units of C19. Recently, management decided to devote additional machine time to other product lines, resulting in only 31,000 machine hours per year that can be dedicated to production of the bearings. An outside company has offered to sell Fowler the bearings at prices of $13.50 for C15 and $13.50 for C19.
Required:
A. Assume that Fowler decided to produce all C15s and purchase C19s only as needed. Determine the number of C19s to be purchased.
B. Compute the net benefit to the company of manufacturing (rather than purchasing) a unit of C15. Repeat the calculation for a unit of C19.
C. Fowler lacks sufficient machine time to produce all of the C15s and C19s needed. Which component (C15 or C19) should Fowler manufacture first with the limited machine hours available? Why? Be sure to show all supporting computations.

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