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Redhead Equipment Inc. manufactures three products. Information about the selling prices and unit costs for the three products is below: Product A B C $90.00
Redhead Equipment Inc. manufactures three products. Information about the selling prices and unit costs for the three products is below: Product A B C $90.00 $60.00 $110.00 Selling price Variable costs Fixed costs $52.00 $24.00 $63.00 $22.00 $8.00 $25.000 Compression machine time 11 min. 6 min. 13 min. Fixed costs are applied based on direct labour hours. Demand for the three products exceeds the company's current production capacity. The compression machine is the constraint, with just 2,500 minutes of compression machine time available this week. Required: a. Given the compression machine constraint, which product should be emphasized? Be sure to show your calculations to support your recommendation. (10 Marks) b. If there is still unused demand for the product that the company is emphasizing from Part A above, up to how much would the company be willing to pay for an additional hour of compression machine time? (2 Marks)
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