2024 – E25 15 Lifemaster produces two types of exercise treadmills regular and deluxe The exercise craze is such

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.