Question2Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Total: 26 marks)
Cavendish Cheese Company
makes three products within theirsingle facility. Data concerning these products follow:
| Products |
| 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 aconstraint in the production facility. A total of 25,800 minutesare available per month on these machines.
Direct labour is a variable cost inthis company.
Required:
- How many minutes of mixing machine time would be required tosatisfy demand for all three products?
- How much of each product should be produced, rounded to thenearest whole unit, to maximize operating income?
- Up to how much should the company be willing to pay, rounded tothe nearest whole cent, for one additional minute of mixing machinetime if the company has made the best use of the existing mixingmachine capacity?
