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A company makes two products, A and B. A sells for $25 per unit and B sells for $35 per unit. the variable cost per unit of A is $ 17.50 and B $ 20. Each unit of A uses 2 kg of raw material. Each of B uses 3 kg of raw material. the availability of raw material is limited to 2000 kg. A company is contracted to supply 500 units of A. Maximum demand for the B is 250 units. Demand for the A is unlimited. how many unit of A will be produced in the profit maximising product?
Make product B first 250 × 3 = 750
2000 – 750 = 1250 kg material left.
For A 1250/2 = 625
A: contribution per unit 7.50. Contribution per kg of material = 7.5/2 = 3.75
B: contribution per unit 15.00. Contribution per kg of material = 15/3 =5
Therefore, after making the required 500 units of A, which uses 1000kg material, switch to making B as it has a better earning rate per kg of material.
250 x 3 = 750 kg used, leaving 250 kg
This is enough to mak another 125 units of A. 500 have to be made then another 125, so 625 in total.
21!The cost incurred in the manufacturer of 1,000 units of product are;
Direct materials
$4,000
Direct labor
$6,000
Variable overheads
$2,000
Fixed overheads
$8,000
If output increases by 25% what will be the effect,if any,on the total cost per unit?
A) Decrease by$1.6o per unit
b) Decrease by$2.00 per unit
c) Decrease by $5.00 per unit
d) No effect
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