AA Inc manufactures hoodies in two sizes: child and adult. The AA Inc factory has excess capacity available, however the specially trained sewers labour force is limited; the company has a maximum of 18,000 direct labour sewing hours per year for manufacturing. Fixed costs are stable and unavoidable, at $300,000.

Per Unit Data:

Childs Hoodie Adult Hoodie

SALES PRICE $ 40 $ 55

Variable Manufacturing Cost $ 18 $ 23

DL hours needed 0.5 DL hours per unit 0.8 DL hours per unit

1. What is the constraining factor for AA Inc for hoodie manufacturing?
2. Use the data above to determine which hoodie size product should be emphasized.
3. If the company raised the price of the adult sized hoodie to $60 (variable costs per unit stay the same) would this price increase change your decision re Part B, which product to emphasize?
4. Name two qualitative considerations that would be part of the product size emphasis decision. Focus on your answer to Part B in your comments.
5. Assuming that the adult-sized hoodie is sold for $55, there is a maximum of 18,000 sewing hours, and assume also that the market demand is limited to 30,000 units of each size. Determine the optimal product mix and calculate the operating profit at this product mix.