Reference no: EM131787543

Question - Kimberton Tool Company manufactures electric carpentry tools. The production department has met all production requirements for the current month and has an opportunity to produce additional units of product with its excess capacity. Unit selling prices and unit costs for three different drill models are as follows:

Home Model Deluxe Model Pro Model

Selling price $68 $75 $90

Direct material 16 20 19

Direct labor ($10 per hour) 10 15 20

Variable overhead 8 12 16

Fixed overhead 16 5 15

Variable overhead is applied on the basis of direct labor dollars, while fixed overhead is applied on the basis of machine hours. There is sufficient demand for production of any model in the product line.

Required:

(a) If Kimberton Company has excess machine capacity and can add more labor as needed (i.e., neither machine capacity or labor is a constraint), the excess production capacity should be devoted to producing which pro products. Support your answer with appropriate data.

(b) If Kimberton Company has excess machine capacity but a limited amount of labor time (300 hours), which product should the excess production capacity be devoted to producing? Support your answer with appropriate data.