29 Jun Question Broyles Company makes four products in a s
Question
Broyles Company makes four products in a single facility. These products have the following unit product costs:
Product
A B C D
Direct Materials 10.70 5.40 5.10 7.20
Direct Labor 19.10 21.40 29.00 34.40
Variable Manufacturing overhead 1.20 1.50 1.80 1.60
Fixed Manufacturing overhead 22.40 16.00 15.00 17.60
Unit product cost 53.40 44.30 50.90 60.80
Additional data concerning these products are listed below:
Product
A B C D
Grinding minutes per unit 2.20 1.20 1.70 1.80
Selling price per unit 65.40 58.50 70.70 76.20
Variable Selling cost per unit 3.60 3.80 2.00 3.40
Monthly demand in units 1,000 4,000 1,000 4,000
The grinding machines are potentially the constraint in the production facility. A total of 14,400 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 hour of grinding machine time if the company has made the best use of the existing grinding machine capacity?
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