Wright Inc

question 48

Essay

Wright Inc. , produces three products.Data concerning the selling prices and unit costs of the three products appear below: Fixed costs are applied to the products on the basis of direct labor hours.
Demand for the three products exceeds the company's productive capacity.The tapping machine is the constraint, with only 2, 400 minutes of tapping machine time available this week.
Required:
a.Given the tapping machine constraint, which product should be emphasized? Support your answer with appropriate calculations.
b.Assuming that 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 tapping machine time?

---

Definitions:

Breaking Even

The point at which total revenues exactly equal total expenses, resulting in no net profit or loss.

Produce

To create or manufacture goods and services for consumer use, often involving a combination of raw materials, labor, and machinery.

Leave the Industry

The process by which firms exit a market or cease operations, often due to unfavorable market conditions or insufficient profits.

Average Variable Cost

The total variable cost divided by the quantity of output produced, representing the variable cost per unit of output.