Xenon Corp. makes three products in a single facility. These products have the following unit product...

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Accounting

Xenon Corp. makes three products in a single facility. Theseproducts have the following unit product costs:
                                                                    ProductI                             ProductII               Product III
Directmaterial                                               $39.25                        $34.60                        $37.25
Directlabor                                                    20.60                        17.95                        17.30
Variable manufacturingoverhead                     5.30                           6.65                         10.65
Fixed manufacturingoverhead                      34.60                         35.90                       30.60
Unitcost                                                        $99.15                        $95.10                       $95.80
Additional data concerning these products are listed below:
                                                                    ProductI                           ProductII             Product III
Mixing minutes perunit                                   6.6                              4                        5.2
Selling price perunit                                    $133.00                  $121.70                  127.65
Variable selling cost perunit                          $9.30                       $6.70                   $8.00
Monthly demand inunits                              2,395                        4,790                    4,125

The mixing machines are potentially the constraint in theproduction facility. A total of 40,000 minutes are available permonth on these machines.
Direct labor is a variable cost in this company.
Required:
1.    How many minutesof mixing machine time would be required to satisfy demand for allthree products?
2.    Using only theavailable 40,000 minutes of machine time, how much of each productshould be produced to maximize net operating income? (Rounddown to the nearest whole units.)
3.    Is there unmetdemand for product(s)? If so, how much and for whichproduct(s)?
4.    Assume there isunmet product demand. How much in total should Xenon be willing topay for extra machine time?
5.    Did variableselling cost per unit figure into any of your calculations? Whichones, if any?
6.    Is there anythingmisleading about the figure given for fixed manufacturingoverhead?
7.    What is thesignificance of contribution margins with respect to question3?
8.    What is thesignificance of contribution margins with respect to question5?
9.    Why isn’t salesprice or the difference between sales prices and the unit costsstated in the problem the best predictor of the priority inproducing the products?

Answer & Explanation Solved by verified expert

4.4 Ratings (956 Votes)

I II III Direct Material 3925 3460 3725 Direct Labor 2060 1795 1730 Variable manufacturing overhead 530 665 1065 Fixed manufacturing overhead 3460 3590 3060 Unit cost 9975 9510 9580 Mixing minutes per unit 660 400 520 Selling price per unit 13300 12170 12765 Variable selling cost per unit See Answer

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Xenon Corp. makes three products in a single facility. Theseproducts have the following unit product costs: ProductI ProductII Product IIIDirectmaterial $39.25 $34.60 $37.25Directlabor 20.60 17.95 17.30Variable manufacturingoverhead 5.30 6.65 10.65Fixed manufacturingoverhead 34.60 35.90 30.60 Unitcost $99.15 $95.10 $95.80Additional data concerning these products are listed below: ProductI ProductII Product IIIMixing minutes perunit 6.6 4 5.2Selling price perunit $133.00 $121.70 127.65Variable selling cost perunit $9.30 $6.70 $8.00Monthly demand inunits 2,395 4,790 4,125The mixing machines are potentially the constraint in theproduction facility. A total of 40,000 minutes are available permonth on these machines.Direct labor is a variable cost in this company.Required:1. How many minutesof mixing machine time would be required to satisfy demand for allthree products?2. Using only theavailable 40,000 minutes of machine time, how much of each productshould be produced to maximize net operating income? (Rounddown to the nearest whole units.)3. Is there unmetdemand for product(s)? If so, how much and for whichproduct(s)?4. Assume there isunmet product demand. How much in total should Xenon be willing topay for extra machine time?5. Did variableselling cost per unit figure into any of your calculations? Whichones, if any?6. Is there anythingmisleading about the figure given for fixed manufacturingoverhead?7. What is thesignificance of contribution margins with respect to question3?8. What is thesignificance of contribution margins with respect to question5?9. Why isn’t salesprice or the difference between sales prices and the unit costsstated in the problem the best predictor of the priority inproducing the products?