Question
Bacon Company makes four products in a single facility. These products have the following unit product costs: Products A B C D Direct materials $
Bacon Company makes four products in a single facility. These products have the following unit product costs:
| Products | |||||||||||||||
| A | B | C | D | ||||||||||||
| Direct materials | $ | 14.30 | $ | 10.20 | $ | 11.00 | $ | 10.60 | |||||||
| Direct labor | 19.40 | 27.40 | 33.60 | 40.40 | |||||||||||
| Variable manufacturing overhead | 4.30 | 2.70 | 2.60 | 3.20 | |||||||||||
| Fixed manufacturing overhead | 26.50 | 34.80 | 26.60 | 37.20 | |||||||||||
| Unit product cost | $ | 64.50 | $ | 75.10 | $ | 73.80 | $ | 91.40 | |||||||
Additional data concerning these products are listed below.
| Products | |||||||||||||||
| A | B | C | D | ||||||||||||
| Grinding minutes per unit | 3.80 | 5.30 | 4.30 | 3.40 | |||||||||||
| Selling price per unit | $ | 76.10 | $ | 93.50 | $ | 87.40 | $ | 104.20 | |||||||
| Variable selling cost per unit | $ | 2.20 | $ | 1.20 | $ | 3.30 | $ | 1.60 | |||||||
| Monthly demand in units | 4,000 | 4,000 | 3,000 | 2,000 | |||||||||||
The grinding machines are the constraint in the production facility. A total of 53,600 minutes are available per month on these machines. Direct labor is a variable cost in this company. Which product makes the MOST profitable use of the grinding machines?
Product A.
Product B.
Product C.
Product D.
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Financial Accounting Tools for business decision making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
6th Edition
978-1119191674, 047053477X, 111919167X, 978-0470534779
