Question
Broyles Company makes four products in a single facility. These products have the following unit product costs: Product ABCD Direct Materials10.705.405.107.20 Direct Labor19.1021.4029.0034.40 Variable Manufacturing
Broyles Company makes four products in a single facility. These products have the following unit product costs:
Product
ABCD
Direct Materials10.705.405.107.20
Direct Labor19.1021.4029.0034.40
Variable Manufacturing overhead1.201.501.801.60
Fixed Manufacturing overhead22.4016.0015.0017.60
Unit product cost53.4044.3050.9060.80
Additional data concerning these products are listed below:
Product
ABCD
Grinding minutes per unit2.201.201.701.80
Selling price per unit65.4058.5070.7076.20
Variable Selling cost per unit3.603.802.003.40
Monthly demand in units1,0004,0001,0004,000
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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