Wakeman Products Inc

question 23

Multiple Choice

Wakeman Products Inc. makes two products-W28H and Z28D. Product W28H's selling price is $27.00 and its unit variable cost is $21.60. Product Z28D's selling price is $170.00 and its unit variable cost is $153.00. The monthly demand is 2,030 units for product W28H and 730 units for Z28D. The constrained resource is a particular machine that is available for 9,500 minutes each month. Each unit of product W28H requires 3 minutes on this machine and each unit of product Z28D requires 10 minutes on this machine.
-Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

• A) $17.00 per minute
• B) $1.70 per minute
• C) $1.80 per minute
• D) $5.40 per minute

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Definitions:

Production Budget

An estimate of the number of units that must be produced in a given period to meet the sales and inventory needs, forming part of the master budget of a business.

Finished Goods Inventory

Products that have completed the manufacturing process but have not yet been sold or distributed to customers.

Expected Units Sold

The number of units of a product that a company anticipates selling in a particular period based on market research and sales forecasts.

Direct Materials Budget

An estimation of the quantity and cost of direct materials necessary for production, matching the production budget.