Reference: 09-13
Brown Company Makes Four Products in a Single

Reference: 09-13
Brown Company makes four products in a single facility. These products have the following unit product costs: $\begin{array}{|l|c|c|c|c|}\hline&\text { Product }\\\hline &A&B&C&D\\\hline \text { Direct materials } & \$ 15.60 & \$ 19.50 & \$ 12.50 & \$ 15.20 \\\hline \text { Direct labour } & 17.60 & 21.00 & 15.40 & 9.40 \\\hline \begin{array}{l}\text { Variable manufacturing } \\\text { overhead }\end{array} & 4.40 & 5.60 & 8.10 & 5.10 \\\hline \begin{array}{l}\text { Fixed manufacturing } \\\text { overhead }\end{array} & 27.50 & 14.40 & 14.50 & 16.50 \\\hline \text { Unit product cost } & \underline{\underline{\$ 65.10}} & \$ 60.50 & \$ 50.50 & \$ 46.20 \\\hline\end{array}$
$\text { Additional data concerning these products are listed below. }$
$\begin{array}{|l|l|l|l|l|}\hline&\text { Product }\\\hline &A&B&C&D\\\hline \text { Grinding minutes per unit } & 2.00 & 1.10 & 0.70 & 0.30 \\\hline \text { Selling price per unit } & \$ 78.70 & \$ 71.10 & \$ 67.90 & \$ 62.60 \\\hline \begin{array}{l}\text { Variable selling cost per } \\\text { unit }\end{array} & \$ 2.60 & \$ 3.10 & \$ 2.80 & \$ 3.50 \\\hline \text { Monthly demand in units } & 3,000 & 2,000 & 2,000 & 4,000 \\\hline\end{array}$ The grinding machines are potentially the 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.
-Which product makes the LEAST profitable use of the grinding machines

A) Product A.
B) Product D.
C) Product B.
D) Product C.

Correct Answer:

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