Problem 14 -44

SOLUTION:
Incremental unit cost if manufactured:
Direct material
Direct labor
Variable overhead
$16 $10 per hour fixed cost
$32 (2 hours)($10 per hour fixed cost)
Total
Unit cost if purchased from an outside supplier
Unit cost savings if manufactured
Machine hours required per unit
Cost savings per machine hour if manufactured
$4 1 hour
$6 2 hours
Prioritize manufacturing blenders because the company saves $1 more per
machine hour than manufacturing electric mixers.
Machine hours available
Machine hours needed to manufacture 20,000 blenders
Remaining machine hours
Number of electric mixers to be produced (30,000 2)
Answer:
Manufacture 20,000 blenders
Manufacture 15,000 electric mixers
Purchase 13,000 electric mixers.

SOLUTION:
Incremental unit cost if manufactured:
Direct material
Direct labor
Variable overhead
$16 $10 per hour fixed cost
$32 (2 hours)($10 per hour fixed cost)
Total
Unit cost if purchased from an outside supplier
New unit cost savings if manufactured
Machine hours required per unit
Cost savings per machine hour if manufactured
$4 1 hour
$11 2 hours

Prioritize manufacturing electric mixers because the company saves $1.50 more
per machine hour than manufacturing blenders.
Machine hours available
Machine hours needed to manufacture 25,000 electric mixers
Remaining machine hours
Answer:
Manufacture 25,000 electric mixers
Purchase 20,000 blenders
Purchase 3,000 additional electric mixers
3

SOLUTION:
Incremental unit cost if manufactured:
Direct material
Direct labor
Variable overhead
$16 $10 per hour fixed cost
$32 (2 hours)($10 per hour fixed cost)
Total
Unit cost if purchased from an outside supplier
Unit cost savings if manufactured
Machine hours required per unit
Cost savings per machine hour if manufactured
$ 6 1 hour
$8 2 hours
Prioritize manufacturing blenders because the company saves $2 more per
machine hour than manufacturing electric mixers.
Machine hours available
Machine hours needed to manufacture 20,000 blenders
Remaining machine hours
Number of electric mixers to be produced (30,000 2)
Answer:
Manufacture 20,000 blenders &15,000 electric mixers
Purchase 13,000 additional electric mixers.

Blender
$

Electric Mixer
6.00 $
4.00

11.00
9.00

6.00
$

12.00
32.00
38.00
6.00

16.00 $
20.00
4.00 $

$
1 hr

2 hrs

4.00
$

3.00

es $1 more per

50,000.00
20,000.00
30,000.00
15,000.00

Blender
$

Electric Mixer
6.00 $
4.00

6.00
9.00

6.00
$
$
1 hr
$

12.00
27.00
38.00
11.00

16.00 $
20.00
4.00 $
2 hrs
4.00
$

5.50

ny saves $1.50 more

50,000.00
50,000.00
-

Blender
$

Electric Mixer
6.00 $
4.00

11.00
9.00

6.00
$
$
1 hr
$

12.00
32.00
40.00
8.00

16.00 $
22.00
6.00 $
2 hrs
6.00
$

4.00

es $2 more per

50,000.00
20,000.00
30,000.00
15,000.00