Product mix decisions (Adapted from CMA, December 1991) Bakker Industries sells three products (products 611, 613, and 615) that it manufactures in a fac¬ tory consisting of four departments (departments 1 through 4). Both labor and machine time are applied to the products in each of the four departments. The machine processing and labor skills required in each department are such that neither machines nor labor can be switched from one department to another.

Bakker's management is planning its production schedule for the next sev¬ eral months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time by department for each of the next six months is listed below.

The sales department's forecast of product demand over the next six months is presented below.

Bakker's inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next six months are presented below.

REQUIRED

(a) Determine whether the monthly sales demand for the three products can be met by Bakker Industries's factory. Use the monthly requirement by depart¬ ment for machine hours and direct labor hours for the production of prod¬ ucts 611, 613, and 615 in your calculations.

(b) What monthly production schedule should Bakker Industries select to maxi¬ mize its dollar profits? Support the schedule with appropriate calculations, and present a schedule of the contribution to profit that would be generated by the production schedule selected.

(c) What other alternatives might Bakker Industries consider to be able to sup¬ ply its customers all the products they demand?(LO 2, 3)

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Monthly Capacity Availability DEPARTMENT 1 2 3 4 Normal machine capacity in machine hours 3500 3500 3000 3500 Capacity of machines being repaired in machine hours (500) (400) (300) (200) Available machine capacity in machine hours 3000 3100 2700 3300 Labor capacity in direct labor hours 4000 4500 3500 3000 Available labor in direct labor hours 3700 4500 2750 2600