Brown Corporation manufactures four products in a single facility. These products have the following unit product costs:
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Brown Corporation manufactures four products in a single facility. These products have the following unit product costs:
| products | ||||
| A | B | C | D | |
| Direct materials | $15,60 | $19.50 | $12.50 | $15.20 |
| Direct labour | 17.6 | 21 | 15.4 | 9.4 |
| Variable manufacturing overhead | 4.4 | 5.6 | 8.1 | 5.1 |
| Fixed manufacturing costs | 27.5 | 14.4 | 14.5 | 16.5 |
| unit cost of product | $65.10 | $60.50 | $50.50 | $46.20 |
Additional information about these products is listed below.
| products | ||||
| A | B | C | D | |
| Grinding minutes per unit | 2 | 1.1 | 0.7 | 0.3 |
| Sale Price per Unit | $78.70 | $71.10 | $67.90 | 62.6 |
| Variable cost of sale per unit | $2.60 | $3.10 | $2.80 | $3.50 |
| Monthly demand in units | 3,000 | 2,000 | 2,000 | 4,000.00 |
Grinding machines are potentially the limitation on the production floor. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this company.
1. Which product should Brown Corporation produce first?
2. How much should the company be willing to pay for an additional minute of grinding machine time if the company has made the best use of existing grinding machine capacity?
Expert Answer:
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