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c) Suppose there is not enough idle capacity to produce all of the units for the overseas
customer and accepting the special order would require cutting back on production of 700
units for regular customers. What would be the minimum acceptable price per unit for the
special order?
The mixing machines are potentially the constraint in the production facility. A total of 27,400
minutes are available per month on these machines. Direct labor is a variable cost in this
company.
a) How many minutes of mixing machine time would be required to satisfy demand for all three
products?
b. How much of each product should be produced to maximize net operating income? (Round off
to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of mixing
machine time if the company has made the best use of the existing mixing machine capacity?
(Round off to the nearest whole cent.)
The company should be willing to pay up to the contribution margin per minute for the marginal
job, which is $4.59.
a) What is the net monetary advantage (disadvantage) of processing Product X and Product Y
beyond the split-off point?
b) What is the minimum amount the company should accept for Product X and Product Y if it is
to be sold at the split-off point?