Purchase Solution

Chef Gourmet, Inc: Production Decisions; Limited Capacity

Not what you're looking for?

Ask Custom Question

Chef Gourmet, Inc. has assembled the following data pertaining to its two most popular products.

Blender Food Processor

Direct Material $18 $33
Direct Labor 12 27
Manufacturing overhead@ $48 per machine hour 48 96
Cost if purchased from an outside supplier 60 114
Annual demand (units) 20,000 28,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $30. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

1. If 50,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?

2. With all other things constant, if management is able to reduce the direct material for a food processor to $18 per unit, how many units of each product should be manufactured? Purchased?

3. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: the unit cost if purchased from an outside supplier is $66 for the blender and $120 for the food processor.

Purchase this Solution
Solution Summary

This solution provides a detailed, step by step explanation of the given accounting question.

Solution Preview

See the attached file.

Chef Gourmet, Inc. has assembled the following data pertaining to its two most popular products.

Blender Food Processor

Direct Material $18 $33
Direct Labor $12 $27
Manufacturing overhead@ $48 per machine hour $48 $96
Cost if purchased from an outside supplier $60 $114
Annual demand (units) 20,000 28,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $30. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

1. If 50,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
First, let us take a make or buy decision.
Cost of making
Blender Food Processor
Direct Material $18.00 $33.00
Direct Labor $12.00 $27.00
Manufacturing overhead@ $48 per machine hour $48.00 $96.00 ...

Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

View More Free Quizzes
Related BrainMass Solutions

  • Relevant costs for Business Decisions

    Is there sufficient capacity on the capping line-up to satisfy demand for all products? 2. What is the production plan for the year that would maximize the company's profit? 3.

  • Marketing Mix for a Fast Food Diet Menu

    The menu item recipes can be developed in cooperation with a well known nutritionist and a well-known gourmet chef such as Wolfgang Puck giving the diet menu the edge it needs to set itself apart from the competition.

  • Developing and marketing a new brand

    Susan Lark and a well-known gourmet chef such as Wolfgang Puck and communicate this to the target market via advertising messages giving the new product line the edge it needs to set itself apart from the competition.

  • Ethnocentrism and its application to TV programs.

    The story behind Iron Chef was that an eccentric gourmet authority (Chairman Kaga) had specially constructed a cooking arena called "Kitchen Stadium" in his castle where visiting chefs would compete against his Gourmet Academy, led by his three (later

  • Role of physicians in shaping future healthcare

    In any gourmet restaurant it is the chief chef that runs the kitchen and everybody and anybody seem to be able understand that and why that is so! So why not here?! The situation is similar.

  • The Answer for Using Excess Capacity at Carpenter's Mate, Inc.

    If Carpenter's Mate has excess machine capacity but a limited amount of labor time, the excess production capacity should be devoted to producing which product or products? Please see the attached file.

  • House of Quality: Operations and Supply Management

    -Based on your analysis, how will you spend your limited funds? Why? With limited funds, the strategic management decisions must entail being focused on core elements of the business.

  • Amy's Bakery: A case study

    Dough production ranges from 1,800 to 3,000 lbs. of bread per day, well over capacity for just 1,300 square feet." As Toy described, "We are like sardines making bread. Surviving in these close quarters is so difficult.

  • Break-Even and Profit Analysis

    263442 Cost Concepts and Application Osgood, Inc. makes a gourmet dark chocolate syrup that is sells to coffee shops for use in making gourmet coffee drinks. Fixed costs for this product are estimated to be $180,000.

View More Related Solutions