Question
Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time
Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakkers management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below.
Monthly Capacity Availability | ||
| ||
Normal machine capacity in machine hours | 3,500 | |
Capacity of machines being repaired in machine hours | (500) | |
Available machine capacity in machine hours | 3,000 | |
Labor capacity in direct labor hours | 4,000 | |
Available labor in direct labor hours | 3,700 |
Labor and Machine | |||||
Specifications per Unit of Product | |||||
| |||||
Product | Labor and Machine Time | ||||
| | ||||
611 | Direct labor hours | 2 | |||
| Machine hours | 2 | |||
613 | Direct labor hours | 1 | |||
| Machine hours | 1 | |||
615 | Direct labor hours | 2 | |||
Machine hours | 2 |
The Sales Departments forecast of product demand over the next 6 months is presented below.
Product | Monthly Sales Volume (in units) | ||
| | ||
611 | 500 | ||
613 | 400 | ||
615 | 1,000 |
Bakkers inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below.
Product | ||||||
| ||||||
611 | 613 | 615 | ||||
| | | ||||
Unit costs: | ||||||
Direct material | $ 7 | $ 13 | $ 17 | |||
Direct labor | 12 | 6 | 12 | |||
Variable overhead | 27 | 20 | 25 | |||
Fixed overhead | 15 | 10 | 32 | |||
Variable selling | 3 | 2 | 4 | |||
Unit selling price | $196 | $123 | $167 |
What is product 615s contribution per machine hour?
- A.$54.50
- B.$109
- C.$167
- D.$58
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