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  3. kitchen magician, inc. has assembled the following

Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products....

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Accounting

Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.

Direct material $ 26 $ 45
Direct labor 20 33
Manufacturing overhead @ $54 per machine hour 54 108
Cost if purchased from an outside supplier 68 116
Annual demand (units) 28,000

34,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $42. Kitchen Magicians management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

If 60,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
Blender Electric Mixer
Manufacture 28,000 16,000
Purchase

With all other things constant, if management is able to reduce the direct material for an electric mixer to $26 per unit, how many units of each product should be manufactured? Purchased?
Blender Electric Mixer
Manufacture
Purchase 28,000

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