C | ⓘ file://CN: Product A Sales price $155 Demand = 50 wk Product B 6 Sales price $115 Demand = 100 wk Assembly 5 mins/unit Assembly 10 mins/unit Machine #3 15 minsunit You have 1 each of Machine#1, #2 and #3 10 mins/unit You have 1 Assembly area Machines can (and should) Machine #1 10 mins/unit Machine #3 15 mins/unit This is an ongoing business, run based upon weckly hours, don’t try to sequence work or figure in start up Operate 2,400 minsiwk Raw Matl Weekly averhead is $6.000 https://d2vlcm61l7u1fs.cloudfront.net/media%2F971%2F97111109-2828-4fc7-aacd-1a0605126ec8%2FphpIZlu9z.png

If we made all of A:
We will use 1 unit of each raw material for the 1st two lines which lead to Product A. Each of this raw material costs $20/unit.
Hence /unit cost of producing A = $40/unit of A
Machine time taken to produce A:
Machine 1 = 10 mins/unit
Machine 2 = 5 mins/unit
Assembly time = 5 mins/unit
machine 3 = 15 + 15 = 30 mins/unit
Major bottleneck comes from Machine 3.
total we have 2400 mins/week
maximum production possible of A = 2400/30 = 80 units of A
Demand of A = 50 units
Hence we need to produce 50 units of A per week.
overhead fixed cost = 6000
total cost = fixed + variable
= 6000 + units*cost/unit
= 6000 + 50*40
= 8000
Sales price = 155
total sales = 155*50 = 7750
Profit = sales – cost = 7750 – 8000 = -250
If we sell only A we make a loss of $250 per week.
 
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