Analyze Costs in a Multiproduct Setting: Bright Tubes, Inc., manufactures projection devices for large television screens. The devices come in two models. 48X and 60X, designed for screens with diagonal measurements of 48 and 60 inches, respectively. Data on sales prices and costs for each model are:

Allocated fixed costs are based on total monthly fixed costs of $140,000. The only production limitation is on the availability of titanium oxide extruders (abbreviated TOES), which are required for each projection tube. The 48X model requires one TOE, while the 60X model requires two TOES. There are 4,000 TOES available per month. Management has decided that it must sell at least 1,000 of each model per month to maintain a full product line. Last month the company used a linear programming package with the profit function:

Maximize profit $35X + $65Y where X represented the 48-inch model and Y represented the 60-inch model. Product outputs, unit revenues and unit variable costs, and total fixed costs were exactly as planned.

Nonetheless, profit performance for last month was disappointing. You have been called in to help management analyze the cause for the poor performance last month and to help improve performance in the future.

Required:

a. What profit was earned last month?

b. What product mix would you recommend this month, and what profit would be expected with your recommended product mix? Show supporting calculations.

Transcribed Image Text:

48X 60X Selling price $140 $220 Variable costs: Materials Other Allocated fixed costs Profit per unit 45 60 40 45 20 50 $ 35 $ 65