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Problem #4. Making product mix decisions_Lifemaster produces




Question;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.


Paper#37460 | Written in 18-Jul-2015

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