Analyze Alternative Products with Differential Fixed Costs: Siberian Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 15,000 pairs of cross-country skis of the Mountaineering model or the Touring model. The sales department assures management that it can sell between 9,000 and 13,000 of either product this year. Because the models are very similar, Siberian Ski will produce only one of the two models. The following information was compiled by the accounting department.

Fixed costs will total $369,600 if the Mountaineering model is produced but will be only $316,800 if the Touring model is produced.

Required:

a. If Siberian could be assured of selling 12.000 of either model, which model would it sell? How much operating profit would be earned with sales of that product?

b. At what sales level, in units, would Siberian be indifferent regardless of the model it chooses to produce?

c. If Siberian faces a limitation on labor so that a maximum of 6.000 Mountaineering models or a maximum of 12.000 Touring models or some combination of models that would fall along that constraint can be produced, what is the optimal production schedule?

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Model Mountaineering Selling price per unit Variable costs per unit $88.00 52.80 Touring. $80.00 52.80