Product mix and overtime decisions Excel Corporation manufactures three L0 1,2 products at its plant. The plant capacity is limited to 120,000 machine hours per year on a single-shift basis. Direct material and direct labor costs are variable.

The following data are available for planning purposes:

REQUIRED

(a) Given the capacity constraint, determine the production levels for the three products that will maximize profits.

(b) If the company authorizes overtime, direct labor cost per unit will be higher by 50% due to the overtime premium. Materials cost and variable support cost per unit will be the same for overtime production as regular production.
Is it worthwhile operating overtime?(LO 2, 3)

Transcribed Image Text:

TOTAL UNIT DEMAND FOR SALES DIRECT DIRECT PRODUCT NEXT YEAR PRICE MATERIALS LABOR SUPPORT VARIABLE MACHINE HOURS XL1 200,000 $10.00 $4.00 $2.00 $2.00 0.20 XL2 200,000 14.00 4.50 3.00 3.00 0.35 XL3 200,000 12.00 5.00 2.50 2.50 0.25