Problem #4. Making product mix decisions_Lifemaster produces

$6.00

Description

Problem
#4. Making product mix decisions

Lifemaster
produces two types of exercise treadmills: regular and deluxe. The exercise
craze is such that Lifemaster could use all its available machine hours to produce
either model. The two models are processed through the same production departments.
Data for both models is as follows: 2. CM per MHr, Regular $387

Per
Unit

Deluxe
Regular

Sale Price
$ 1,020 $ 560

Costs:

Direct Material 300 90

Direct Labor 88 188

Variable Manufacturing Overhead 264 88

Fixed Manufacturing Overhead* 138 46

Variable Operating Expenses 111 65

Total Costs 901 477

Operating Income $ 119 $ 83

*allocated
on the basis of machine hours

Requirements

1.
What is the constraint?

2.
Which model should Lifemaster produce? (Hint: Use the allocation of fixed manufacturing
overhead to determine the proportion of machine hours used by each product.)

3.
If Lifemaster should produce both models, compute the mix that will maximize operating
income.

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Problem #4. Making product mix decisions_Lifemaster produces

$6.00

Description

Problem
#4. Making product mix decisions

Lifemaster
produces two types of exercise treadmills: regular and deluxe. The exercise
craze is such that Lifemaster could use all its available machine hours to produce
either model. The two models are processed through the same production departments.
Data for both models is as follows: 2. CM per MHr, Regular $387

Per
Unit

Deluxe
Regular

Sale Price
$ 1,020 $ 560

Costs:

Direct Material 300 90

Direct Labor 88 188

Variable Manufacturing Overhead 264 88

Fixed Manufacturing Overhead* 138 46

Variable Operating Expenses 111 65

Total Costs 901 477

Operating Income $ 119 $ 83

*allocated
on the basis of machine hours

Requirements

1.
What is the constraint?

2.
Which model should Lifemaster produce? (Hint: Use the allocation of fixed manufacturing
overhead to determine the proportion of machine hours used by each product.)

3.
If Lifemaster should produce both models, compute the mix that will maximize operating
income.

Reviews

There are no reviews yet.

Be the first to review “Problem #4. Making product mix decisions_Lifemaster produces”

Your email address will not be published. Required fields are marked *