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What is the machining time required for one unit of product A? Option 1: 18 hours Option 2: 16 hours Option 3: 20 hours Option 4: 14 hours

Answer :

The machining time for one unit of product A is 20 hours. This option provides the lowest total cost and it contributes to a business practice of utilizing more machine hours and less labor to optimize costs.

The machining time for one unit of product A will be 20 hours. This is according to the indicated production technology chosen by the firm, which yields the lowest total cost of $1,000.

Here is a breakdown of the computations: For a labor cost of $16/hour, the total costs are $1080, $1040, and $1000 for 18, 16, and 20 hours respectively. However, for a $20/hour labor cost, the total costs all equate to $1200 regardless of the hours. Thus, choosing a 20-hour machining time provides the best economical choice.

It's important to note that the firm opted for this time frame because it coincides with the use of cheaper machine hours, leading to a shift in favor of more machine use and less labor.

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