Question Four

Part 1

Midas Touch Tools (MTT) makes cutting tools for metalworking operations. It makes two types of tools: LC115, a regular cutting tool, and CB698, a high precision cutting tool. LC115 is manufactured on a regular machine, but CB698 must be manufactured on both the regular machine and a high precision machine. The following information is available:

LC1 15 C3698 Selling price $ 200 S 300 Variable manufacturing cost per unit $ 120 S 200 Variable marketing cost per unit $ 30 S 70 Budgeted total fixed overhead costs S 700,000 5 1,100,000 Hours required to produce one unit on the regular machine 1.0 0.5