Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products....
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Accounting
Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.
Direct material
$
26
$
45
Direct labor
20
33
Manufacturing overhead @ $54 per machine hour
54
108
Cost if purchased from an outside supplier
68
116
Annual demand (units)
28,000
34,000
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $42. Kitchen Magicians management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
Required:
If 60,000 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?
Blender
Electric Mixer
Manufacture
28,000
16,000
Purchase
With all other things constant, if management is able to reduce the direct material for an electric mixer to $26 per unit, how many units of each product should be manufactured? Purchased?
Blender
Electric Mixer
Manufacture
Purchase
28,000
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