Question

Leach Finishing makes various metal fittings for the construction industry. Three of the fittings, models X-12, X-24, and X-30, require grinding on a patented machine of which Leach has only one. The cost of production information for the three products follow: X-12X-24X-30 Price per fitting$ 31$ 47$ 66 Variable cost per fitting$ 16$ 23$ 40 Units per hour of grinding18.012.510.0 The testing machine used for both models has a capacity of 2,990 hours annually. Fixed manufacturing costs are $488,000 annually. Required: a. Suppose that Leach Finishing can sell at most 56,800 units of any one fitting. How many units of each fitting model should Leach Finishing produce annually? b. Suppose that Leach Finishing can sell at most 16,200 units of any one fitting. How many units of each fitting should Leach Finishing produce annually?

Answer 1

Leach Finishing should produce the maximum number of each fitting model that are within the sales limit and do not exceed the annual capacity of the grinding machine.

Step-by-step explanation:

To determine how many units of each fitting model Leach Finishing should produce annually, we need to consider the capacity of the grinding machine and the sales limit for each fitting. Before we move on to the calculations, it's important to note that Leach Finishing should produce the maximum number of units for each fitting model that are within the sales limit and do not exceed the annual capacity of the grinding machine.

a. If Leach Finishing can sell at most 56,800 units of any one fitting, the annual production should be determined as follows:

• X-12: 18.0 units per hour x 2,990 hours = 53,820 units (within the sales limit)
• X-24: 12.5 units per hour x 2,990 hours = 37,375 units (within the sales limit)
• X-30: 10.0 units per hour x 2,990 hours = 29,900 units (within the sales limit)

b. If Leach Finishing can sell at most 16,200 units of any one fitting, the annual production should be determined as follows:

• X-12: 16,200 units (within the sales limit)
• X-24: 16,200 units (within the sales limit)
• X-30: 16,200 units (within the sales limit)