Question

Redner, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:

	Product
	J			K			L
Selling price	$	95		$	75		$	105
Variable costs	$	80		$	70		$	85
Fixed costs		25			4			22
Granding machine time (minutes)		15			4			5

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 grinding machine is the constraint, with only 2,700 minutes of grinding machine time available this week.

Required:
a-1.	Calculate the contribution margin per minute for all three products. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	J	K	L
Contribution margin per minute	$	$	$

a-2.	Given the grinding machine constraint, which product should be emphasized?
	Product J Product K Product L

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 grinding machine time? (Omit the "$" sign in your response.)

Maximum amount

$  per hour

Answer 1

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