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Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
| | Products |
| | A | B | C | D |
| Direct materials | $ | 16.60 | $ | 20.50 | $ | 13.50 | $ | 16.20 |
| Direct labor | | 18.60 | | 22.00 | | 16.40 | | 10.40 |
| Variable manufacturing overhead | | 5.40 | | 6.60 | | 9.10 | | 6.10 |
| Fixed manufacturing overhead | | 28.50 | | 15.40 | | 15.50 | | 17.50 |
| Unit product cost | | 69.10 | | 64.50 | | 54.50 | | 50.20 |
| |
Additional data concerning these products are listed below.
| | Products |
| | A | B | C | D |
| Grinding minutes per unit | | 2.50 | | 1.60 | | 1.20 | | 0.80 |
| Selling price per unit | $ | 83.70 | $ | 76.10 | $ | 72.90 | $ | 67.60 |
| Variable selling cost per unit | $ | 3.60 | $ | 4.10 | $ | 3.80 | $ | 4.50 |
| Monthly demand in units | 4,000 | 3,000 | 3,000 | 5,000 |
| |
The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Which product makes the MOST profitable use of the grinding machines? (Round your intermediate calculations to 2 decimal places.)
A) Product C
B) Product A
C) Product B
D) Product D
Answer & Explanation
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