Calculate the requirement s as follows: 1 Particulars 2 Selling Price per unit 3 Less: 4 Direct materials 5 Direct Labor 6 Variable manufacturing overhead 7 Variable selling cosr per unit 8 Contribution 9 Grinding minutes per unit 10 Contrubution per minute of Grindin 76.6 94 87.9 104.7 14.8 19.9 10.7 27.9 3.2 11.5 34.1 11.1 40.9 3.7 2.7 34.4 4.3 8.00 50.5 5.8 8.71 46.9 3.9 12.03 35.4 7.38 12 Demand 13 Grinding minutes allocated 14 Units made 15 As we can infer from above that, the current capacity of 54100 minutes has 16 catered demand for product D., B and almost product A. The capacity is falling 4500 18250 26100 4244 4500 2500 9750 2500 3500 4500 short for product C, which has a contriubtion od S7.38 per grinding minute Therefore, the company should be willing to pay $7.38 for one additonal minute 17 of grinding machine 18 Therefore, third option, S7.38 is the correct option.
Calculations: 1 Particulars 2 Selling Price per unit 3 Less: 4 Direct materials 5 Direct Labor 6 Variable manufacturing overhead 7 Variable selling cosr per unit 8 Contribution 9 Grinding minutes per unit 10 Contrubution per minute of Grinding B8/B9 76.6 94 87.9 104.7 14.8 19.9 4.8 2.7 10.7 27.9 3.2 11.1 40.9 3.7 11.5 34.1 3.8 4.8 B2-B4-B5-B6-B7-C2-C4-C5-C6-C7D2-D4-D5-D6-D7-E2-E4-E5-E6-E7 4.3 3.9 -C8/C9 -D8/D9 IV 12 Demand 13 Grinding minutes allocated 14 Units made 15 16 As we can infer from above that, the current capacity of 54100 minutes has catered demand for product D, B and almost 4500 4500 3500 2500 54100-C13-E13 C12 C9 B13/B9 E12 E9 2500 4500 product A. The capacity is falling short for product C, which has a contriubtion od $7.38 per grinding minute. Therefore, 17 the company should be willing to pay $7.38 for one additonal minute of grinding machine 18 Therefore, third option, $7.38 is the correct option