Aaron Co produces three different pet carriers- in its manufacturing facility- I101, J220 & K450....
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Accounting
Aaron Co produces three different pet carriers- in its manufacturing facility- I101, J220 & K450. Unit data for the three products follows:
Products
I101
J220
K450
Selling Price
$80
$55
$60
Variable Costs
Direct Materials
30
24
27
Labor and other costs
25
19
21
Estimated Demand
300 Units
275 Units
295 Units
All three products use the same direct materials, Metal. Metal costs $3 per pound and a maximum of 7,000 pounds is available each month. Aaron must produce a minimum of 200 units of each product.
I. How many units of product I101, J220 and K450 should Aaron produce? (8)
II. What is the maximum amount Aaron would be willing to pay for another 500 pounds of metal? How many extra units they will be able to manufacture? (5)
III. Assume that 600 pounds of metal got spoiled due to an accident. Calculate the optimal product mix again in this situation. (5)
IV. Determine the number of units Aaron will have to sell to break even? (Assume fixed cost will be $584,800 and sales-mix will be 40% I101, 35% J220 and 25% K450) (8)
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