Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
Additional data concerning these products are listed below.
The grinding machines are potentially the constraint in the production facility. A total of 9,800 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
-Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent.)
A) $18.33
B) $12.20
C) $0.00
D) $19.30

Question

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
  Additional data concerning these products are listed below.
  The grinding machines are potentially the constraint in the production facility. A total of 9,800 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
-Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent.)
A) $18.33 
B) $12.20 
C) $0.00 
D) $19.30

Quizplus · Accepted Answer

11ea7761_1618_ab9c_81a5_efecccb8979b_TB2580_00 11ea7761_1618_ab9d_81a5_89dfa782917f_TB2580_00 There is more demand for time on the grinding machine than it has capacity. The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $18.33 per minute for Product A.

Bruce Corporation Makes Four Products in a Single Facility