Blocker Company makes three products in a single facility. These products have the following unit product costs and additional costs:
Product 1
Direct Material $33.80
Direct Labor 21.20
Variable Manufacturing Overhead 2.20
Fixed Manufacturing Overhead 12.50
Unit Product Cost $69.70
Mixing minutes per unit $1.20
Selling Price per Unit 68.00
Variable Selling Cost per unit 1.60
Monthly demand in units 3,000
Product 2
Direct Material $50.30
Direct Labor 23.80
Variable Manufacturing Overhead 1.60
Fixed Manufacturing Overhead 8.10
Unit Product Cost $83.80
Mixing minutes per unit $0.60
Selling Price per Unit 90.40
Variable Selling Cost per unit 2.10
Monthly demand in units 4300
Product 3
Direct Material $56.70
Direct Labor 14.60
Variable Manufacturing Overhead 0.30
Fixed Manufacturing Overhead 8.70
Unit Product Cost $80.30
Mixing minutes per unit $0.10
Selling Price per Unit 83.90
Variable Selling Cost per unit 1.90
Monthly demand in units 2,300
The mixing machines are potentially the constraint in the production facility. A total of 6,310 minutes are available per month on these machines. Direct labor is a variable cost.
1. How many minutes of mixing machine time would be required to satisfy demand for all 3 products?
2. How much of each product should be produced to maximize net operating income?
3. 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?