Question

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

	Products
	A		B		C		D
Direct materials	$	14.80	$	10.70	$	11.50	$	11.10
Direct labor		19.90		27.90		34.10		40.90
Variable manufacturing overhead		4.80		3.20		3.10		3.70
Fixed manufacturing overhead		27.00		35.30		27.10		37.70
Unit product cost		66.50		77.10		75.80		93.40

Additional data concerning these products are listed below.

	Products
	A		B		C		D
Grinding minutes per unit		4.30		5.80		4.80		3.90
Selling price per unit	$	76.60	$	94.00	$	87.90	$	104.70
Variable selling cost per unit	$	2.70	$	1.70	$	3.80	$	2.10
Monthly demand in units		4,500		4,500		3,500		2,500

The grinding machines are potentially the constraint in the production facility. A total of 71,400 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity?

• $12.03

• $3.69

• $7.38

• $10.08

Answer 1

The answer has been presented to the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.