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

Blender Electric Mixer Direct material$21$35 Direct labor1528 Manufacturing overhead @ $44 per machine hour 4488 Cost if purchased from an outside supplier 63108 Annual demand (units)23,00034,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $33. Kitchen Magician's management has a policy of filling all sales orders, even if it means 

purchasing units from outside suppliers.

 

Required:

2. If 56,000 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?
4. With all other things constant, if management is able to reduce the direct material for an electric mixer to $21 per unit, how many units of each product should be manufactured? Purchased?

Answer rating: 100% (QA)

To determine the optimal production strategy for Kitchen Magician Inc we need to calculate the contr... View the full answer