Kitchen Magician, Inc., has assembled the following data pertaining to its two most popular products. Blender Mixer Direct material $ 6 $ 11 Direct labor 4 9 Manufacturing overhead @ $16 per machine hour 16 32 Cost if purchased from an outside supplier 20 38 Annual demand (units) 20,000 28,000 Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $10. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Required: 1. If 50,000 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? 2. With all other things constant, if management is able to reduce the direct material for a mixer to $6 per unit, how many units of each product should be manufactured? Purchased?
Kitchen Magician, Inc., has assembled the following data pertaining to its two most popular products. Blender Mixer Direct material $ 6 $ 11 Direct labor 4 9 Manufacturing overhead @ $16 per machine hour 16 32 Cost if purchased from an outside supplier 20 38 Annual demand (units) 20,000 28,000 Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $10. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Required: 1. If 50,000 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? 2. With all other things constant, if management is able to reduce the direct material for a mixer to $6 per unit, how many units of each product should be manufactured? Purchased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Kitchen Magician, Inc., has assembled the following data pertaining to its two most popular products.
| Blender | Mixer | |||||
| Direct material | $ | 6 | $ | 11 | ||
| Direct labor | 4 | 9 | ||||
| Manufacturing |
16 | 32 | ||||
| Cost if purchased from an outside supplier | 20 | 38 | ||||
| Annual demand (units) | 20,000 | 28,000 | ||||
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $10. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
Required:
1. If 50,000 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?
2. With all other things constant, if management is able to reduce the direct material for a mixer to $6 per unit, how many units of each product should be manufactured? Purchased?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Step 1: General understanding of Make or Buy Decision
VIEWStep 2: Computation of Machine hour required for per unit and Mfg. Variable overhead
VIEWStep 3: Computation of units of each product manufacture and purchased for Part 1
VIEWStep 4: Computation of units of each product manufacture and purchased for Part 2
VIEWSolution
VIEW
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education