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I (18 Points) 777 Inc. makes three products in a single facility. These products have the following unit product costs: Direct materials Direct labor Variable
I (18 Points) 777 Inc. makes three products in a single facility. These products have the following unit product costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost Additional data concerning these products are listed below. Mixing minutes per unit Selling price per unit Variable selling cost per unit Monthly demand in units A Product B $ 15.80 $ 19.10 11.00 $ 17.20 14.10 20.30 2.60 3.10 3.30 21.60 24.10 31.30 $ 59.10 $ 55.40 $ 69.00 A Product B C $ S 3.10 3.30 2.60 74.30 S 66.40 $ 81.00 2.80 $ 2.30 $ 1.90 2,000 1,000 1,000 The mixing machines are potentially the constraint in the production facility. A total of 10,900 minutes are available per month on these machines. Direct labor is a variable cost in this company. Total fixed costs amount to $73,700. REQUIRED (SHOW ALL DETAILS AND CALCULATIONS FOR EACH PART): 1. Rank the products in terms of profitability with (1) being most profitable and (3) being least profitable. (Round to two numbers after the decimal as in the given.) 2. How many minutes of mixing machine time would be required to satisfy demand for all three products? 3. Assuming ZZZ wishes to maximize its contribution margin, how many units of each product should be produced? (Round to the nearest whole unit.) 4. Based on your answer to part (c), what is the maximum contribution margin generated? 5. Based on your answer to part (d), what is the maximum net operating income generated? 6. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round to two numbers after the decimal as in the given.) 15
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