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Limiting factor (managerial accounting)
Kitchen magician, inc. Has assembled following data pertaining to its two most popular products.
Blender electric motors Direct material $ 6 $11 Direct labor 4 9 Manufacturing Overhead @ $16 Per machine hour 16 32 Cost if purchased From an outside Supplier 20 38 Annual demand 20000 28000 Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $10. Kitchen magician's management has a policy of filling sales orders, even if means purchasing units from outside suppliers. REQUIRED: If 50000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product firm should manufacture? How many units of each product should be purchased? |
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