Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products. Electric Mixer Direct Material Direct Labor Manufacturing Overhead @ $16 per machine hour Cost if purchased from an outside supplier Annual demand (units) Blender $6 4 16 20 20,000 $11 9 32 38 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. 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 an electric 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. Electric Mixer Direct Material Direct Labor Manufacturing Overhead @ $16 per machine hour Cost if purchased from an outside supplier Annual demand (units) Blender $6 4 16 20 20,000 $11 9 32 38 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. 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 an electric 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
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Transcribed Image Text:Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.
Electric
Mixer
$11
Direct Material
Direct Labor
Manufacturing Overhead @ $16 per machine
hour
Cost if purchased from an outside supplier
Annual demand (units)
Blender
$6
4
16
20
20,000
9
32
38
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.
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 an electric mixer to $6 per unit, how many
units of each product should be manufactured? Purchased?
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