Question

Tyson Corner Manufacturing produces two bearings: C15 and C19. Data regarding these two bearings follow C15 C19 2.00 2.50 Machine hours required per unit Standard cost per unit Direct material $2.50 $4.00 Direct labor 5.00 4.00 Manufacturing overhead: Variable 3.00 2.50 Fixed** 4.00 5.00 Total $14.50 $15.50 * Applied on the basis of direct labor hours Applied on the basis of machine hours **

Please show all calculations.

Answer 1

A.Computation of number of C19s to be purchased

Machine hours available	31,000
Less: Machine hours for C15 (8000*2)	16,000
Machine hours available for C19	15,000
Units to be manufactured 15000/2.50	6,000
Annual requirement	11,000
Less: Units to be manufactured	6,000
Number of C19s to be purchased	5,000

B.Computation of the net benefit to the company of manufacturing a unit of C15 and a unit of C19.

	C15	C19
Direct material	2.5	4
Direct Labor	5	4
Variable overhead	3	2.5
Total variable cost	10.50	10.50
Purchase price quoted	13.50	13.50
Less: Total variable cost	10.50	10.50
Net benefit per unit of manufacturing	3	3

C. Which component (C15 or C19) should Tyson Corner manufacture first

	if C15 is manufactured first	if C19 is manufactured first
Machine hours available	31,000	31,000
Less: Machine hours required for first product	16,000 (8,000*2)	27,500 (11,000*2.50)
Machine hours available for second product	15,000	3,500
Units to be manufactured	6,000 (15,000/2.50)	1,750 (3,500/2)
Units to C15 manufactured	8,000	1,750
Units to C19 manufactured	6,000	11,000
Net benefit of manufacturing C15	24,000 (8000*3)	5,250 (1750*3)
Net benefit of manufacturing C19	18,000 (6000*3)	33,000 (11,000*3)
Total benefit	42,000	38,250

C15 should be produced first as the total benefit is higher than producing C19 first.