Past experience has shown that the fixed manufacturing overhead component includ
ID: 2448105 • Letter: P
Question
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $27. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
If 80,000 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?
With all other things constant, if management is able to reduce the direct material for a food processor to $22 per unit, how many units of each product should be manufactured? Purchased?
Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products.Explanation / Answer
Units that should be manufactured Blender Food Processor Direct Material 22 32 Direct Labour 15 43 Manufacturing Overhead 54 108 Total Cost 91 183 Hour per unit 1 2 Ranking I II Units to be manufactured 38000 21000 42000 Units to be purchased 24000 45000-21000