Lowell Corporation manufactures both a deluxe and a standard model of a household food blender. Because of limited demand, for several years production has been at 80% of estimated capacity, which is thought to be limited by the number of machine hours available. At current operation levels, a profit analysis for each product line shows the following data:

Management wants to utilize the company’s current excess capacity by increasing production.
Required

a. What general decision guideline applies in this situation?

b. Assuming that sufficient units of either product can be sold at current prices to use existing capacity fully and that total fixed cost will not be affected, prepare an analysis showing which product line should be emphasized if net income for the firm is the decision basis.

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Sales price... Production costs: Direct material.. Direct labor.... Variable manufacturing overhead. Fixed manufacturing overhead" Variable operating expenses... Fixed operating expenses Total cost... Operating income. Per-Unit Data Deluxe $216 Standard $84 $89 $12 36 23 15 11 25 $165 10 $56 18 10 8 5 $191 $71 $ 25 $13