Question
Question No. 4: Production under Constrained Resources (5 Marks; 25 Minutes) Glover Company makes three products in a single facility. These products have the following
Question No. 4: Production under Constrained Resources (5 Marks; 25 Minutes)
Glover Company makes three products in a single facility. These products have the following unit product costs:
Product
A
B
C
Direct materials
$
35.10
$
51.60
$
58.00
Direct labor
22.50
25.10
15.90
Variable manufacturing overhead
2.30
1.70
1.60
Fixed manufacturing overhead
12.20
7.80
8.40
Unit product cost
$
72.10
$
86.20
$
83.90
Additional data concerning these products are listed below.
Product
A
B
C
Mixing minutes per unit
1.30
0.80
0.20
Selling price per unit
$
81.00
$
103.40
$
96.90
Variable selling cost per unit
$
2.90
$
3.40
$
3.20
Monthly demand in units
3100
4400
2400
The mixing machines are potentially the constraint in the production facility. A total of 7930 minutes are available per month on these machines. Direct labor is a variable cost in this company.
Required:
b. How much of each product should be produced to maximize net operating income?
A
Optimal production
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