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(3) Product-Mix decision (4 marks) Nike produces the Air Court tennis shoe and the Air Max running shoe. Nike decides how many shoes of each
(3) Product-Mix decision (4 marks) Nike produces the Air Court tennis shoe and the Air Max running shoe. Nike decides how many shoes of each type to produce. Assume that Machine time is the measure of capacity, and there is a maximum of 10,000 hours of machine time. The factory can produce 10 pairs of Air Court shoes or 5 pairs of Air Max shoes in 1 hour of machine time. The profitability of the two types of shoes can be summarized as: Air Court Air Max Selling price per pair $80 $120 Variable costs per pair 60 84 Contribution margin per pair 20 36 Contribution margin ratio 25% 30% Required: e. Suppose capacity is limited to 10,000 hours of machine time. Which product should Nike choose to produce, and why
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