Problem
Glunn Company makes three products in a single facility. These products have the following unit product costs:
Product A B C Direct materials $ 12.80 $ 9.30 $ 4.70 Direct labor 14.10 14.90 10.00 Variable manufacturing overhead 1.20 0.90 0.50 Fixed manufacturing overhead 18.50 17.20 23.70 Unit product cost $ 46.60 $ 42.30 $ 38.90
Additional data concerning these products are listed below.
Product A B C Mixing minutes per unit 3.70 3.40 3.90 Selling price per unit $ 59.20 $ 60.10 $ 55.30 Variable selling cost per unit $ 2.90 $ 2.70 $ 3.70 Monthly demand in units 2,000 4,000 2,000
The mixing machines are potentially the constraint in the production facility. A total of 24,200 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 much of each product should be produced to maximize net operating income?
c. Up to how much should the company be willing to pay for one additional minute of mixing machine time if the company has made the best use of the existing mixing machine capacity?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.