Brown Company makes four products in a single facility. These products have the following unit product costs:

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\text { Product }

\begin{array}{|l|r|r|r|r|r} \hline& \text { A } & \text { B } & \text { C } & \text { D } \\\hline \text { Direct Materials } & \$ 15.60 & \$ 19.50 & \$ 12.50 & \$ 15.20 \\\hline \text { Direct Labour } & \$ 17.60 & \$ 21.00 & \$ 15.40 & \$ 9.40 \\\hline \text { Variable Manufacturing Overhead } & \$ 4.40 & \$ 5.60 & \$ 8.10 & \$ 5.10 \\\hline \text { Fixed Manufacturing Overhead } & \$ 27.50 & \$ 14.40 & \underline{\$ 14.50} & \underline{\$ 16.50} \\\hline \text { Unit Product Cost } & \$ 65.10 & \$ 60.50 & \$ 50.50 & \underline{\$ 46.20} \\\hline\end{array}

Additional data concerning these products are listed below.

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\text { Product }

\begin{array}{l|r|r|r|r|}\hline \text { Grinding Minutes per Unit } & \text { A } & \text { B } & \text { C } & \text { D } \\\hline \text { Selling Price per Unit } & 2.00 & 1.10 & 0.70 & 0.30 \\\hline \text { Variable Selling Cost per Unit } & \$ 2.60 & 7 \$ 1.10 & \$ 67.90 & \$ 62.60 \\\hline \text { Monthly Demand in Units } & 3,000 & \$ 3.10 & \$ 2.80 & \$ 3.50 \\\hline\end{array}

The grinding machines are potentially a constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labour is a variable cost in this company.
-What maximum amount (rounded to the nearest whole cent)should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity?
A) $0.
B) $10.60.
C) $19.25.
D) $21.90.

Consider a Decision Facing a Firm of Either Accepting or Rejecting

Multiple Choice

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