Fleet Valley Shoes produces two models: the Nx100 (a shoe aimed at competitive runners) and the Mx100 (a shoe aimed at fitness buffs). Sales and costs for the most recent year are indicated:

Required
a. Suppose the company has 200,000 assembly hours available. Further, management believes that at least 4,000 pairs of each model must be produced so that the company has a presence in both market segments. How many pairs of each model should be produced in the coming year?
b. Suppose management decides that at least 6,000 pairs of each model must be produced. What is the opportunity cost of this decision versus requiring only 4,000 pairs?

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Nx100 Mx100 Sales (pairs) 20,000 80,000 Sales $3,000,000 (700,000) $8,800,000 (1,200,000) Variable costs Contribution margin Fixed costs 2,300,000 (20,000) 7,600,000 (1,500,000) $6,100,000 Profit $2,280,000 Assembly time per pair Profit per assembly hour CM per assembly hour 3 hours 2 hours $38.00 $37.50 $38.33 $47.50