Glover Company Makes Three Products in a Single Facility

question 129

Essay

Glover Company makes three products in a single facility.These products have the following unit product costs: Additional data concerning these products are listed below. The mixing machines are potentially the constraint in the production facility.A total of 10,900 minutes are available per month on these machines.
Direct labor is a variable cost in this company.

Required:
a.How many minutes of mixing machine time would be required to satisfy demand for all three products?
b.How many units of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.)
c.Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.)

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Definitions:

All Other Things Equal

A phrase used in economics, indicating that all other variables are held constant except the variables being studied.

Relevant Factors

Factors that significantly impact the analysis or outcome of a particular situation or model.

Linear Production

A production process where outputs change proportionally with changes in input levels.

Maximum Number

The highest value or quantity that is achievable or allowed in a given set or range of values.