E25-15
Making product mix decisions
E25-15 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:
|
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.
TUTORIAL PREVIEW
|
Lifemaster
|
||
|
Product Mix Analysis
|
||
|
|
Deluxe
|
Regular
|
|
Sale price per unit
|
$1,020
|
$560
|
File name: E25-15 Lifemaster .xls File type: .xls PRICE: $8
