Rutro Corp. makes three products in a single facility. These products have the following unit product costs:

Product AProduct BProduct C

Direct material$32.00$40.00$42.00

Direct labor22.0020.0016.00

Variable manufacturing overhead6.008.0015.00

Fixed manufacturing overhead29.0038.0028.00

Unit cost$89.00$106.00$101.00

Additional data concerning these products are listed below:

Product AProduct BProduct C

Mixing minutes per unit342

Selling price per unit$105.00$124.00130.00

Variable selling cost per unit$10.00$8.00$9.00

Monthly demand in units5,5004,3003,800

The mixing machines are potentially the constraint in the production facility.A total of 40,000 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Required:

• How many minutes of mixing machine time would be required to satisfy demand for all three products?
• What is the contribution margin per minute individually for Products A, B, and C?

• Using only the available 40,000 minutes of machine time, how much of each product should be produced to maximize net operating income? (Rounddownto the nearest whole units.)

• Is there unmet demand for product(s)? If so, how much and for which product(s)?

• Assume there is unmet product demand. How much in total should Rutro be willing to pay for additional machine time?

• Did variable selling cost per unit figure into any of your calculations? Which ones, if any?

• Is there anything misleading about the figure given for fixed manufacturing overhead?

• What is the significance of contribution margins with respect to determining how much of each product to produce to maximize profit?

• What is the significance of contribution margins with respect to determining how much Rutro should pay for additional machine time?

• Why isn't sales price or the difference between sales prices and the unit costs stated in the problem the best predictor of the priority in producing the products?