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Cavendish Cheese company makes three products within their single facility. Data concerning these products follow: Product .
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Cavendish Cheese company makes three products within their single facility. Data concerning these products follow:
Product .................................................A.................B.......................C
Selling price per unit...........................$67.90........$57.70.............$43.90
Direct materials.....................................$12.10.........$10.30...........$8.60
Direct labour............................................$14.10........$8.00................$6.80
Variable manufacturing overhead...........$2.60..........$2.20..........$1.80
Variable selling cost per unit....................$2.50.........$2.20...........$2.50
Mixing minutes per unit.............................2.70..........3.30..............4.70
Monthly demand in units..........................1,000.........3,000............3,000
The mixing machines are potentially a constraint in the production facility. A total of 25,800 minutes are available per month on these machines.
Direct labour is a variable cost in this company.
Required:
1) How many minutes of mixing machine time would be required to satisfy demand for all three products?
2) How much of each product should be produced, rounded to thee nearest whole unit, to maximize operating income?
3) Up to how much should the company be willing to pay, rounded to the nearest whole cent, for one additional minute of mixing machine time if the company has made the best use of the existing mixing machine capacity?
