TB Problem Qu. 06-195 (Algo) Glover Company makes three products ...

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

	Product
	A	B	C
Direct materials	$	34.80	$	51.30	$	57.70
Direct labor		22.20		24.80		15.60
Variable manufacturing overhead		3.00		1.90		1.10
Fixed manufacturing overhead		10.90		7.00		8.30
Unit product cost	$	70.90	$	85.00	$	82.70

Additional data concerning these products are listed below.

	Product
	A	B	C
Mixing minutes per unit		1.30		1.00		0.40
Selling price per unit	$	88.75	$	100.40	$	93.90
Variable selling cost per unit	$	2.75	$	3.25	$	2.80
Monthly demand in units		2,800		4,100		2,100

The mixing machines are potentially the constraint in the production facility. A total of 7,860 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Required:

a. How many minutes of mixing machine time would be required to satisfy demand for all three products (if there were no production constraints)? Show your computation.

b. Based on the existing production constraints, how much of each product should be produced to maximize net operating income? Explain your answer and show your computations.

c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has already made the best use of the existing mixing machine capacity? Explain your answer and show your computations.