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Stigler company makes two products in a single facility. These products have the following unit product...

Stigler company makes two products in a single facility. These products have the following unit product costs:

Products xyz abc
selling price per unit $69 $63
Monthly demand in units 2000 4000
cost of production:
direct material $11 $12
Direct labor $16 $14
Variable manufacturing overhead $5 $5
Fixed manufacturing overhead $18.5 $17.2
Unit Product cost $50.50 $48.20

Additional data concerning these products are listed below:

Products xyz abc
Mixing minutes required per units 5 4

the mixing machines are potentially the constraint in the production facility. since stigler expects to have only 13000 minutes next month, they decided to inquire about the possibility of renting a mixing machine from another company they would provide additional 5000 minutes. up to how much should the company be willing to pay for the machine? assume that the company has made the best use of the existing mixing machine capacity.

a. $18500

b. $40000

c. $37000

d. $38800

business   accounting   
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