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Austin Enterprises makes and sells three types of dress shirts. Management is trying to determine the most profitable mix. Sales prices, demand, and use of
Austin Enterprises makes and sells three types of dress shirts. Management is trying to determine the most profitable mix. Sales prices, demand, and use of manufacturing inputs follow Sales price Maximum annual demand (units) Input requirement per unit S 190 35,000 25,000 15,000 Direct material Direct labor 0.4 yards 0.8 hours 0.2 yards 2 hours 0.5 yards 8 hours Costs Variable costs Materials Direct labor Factory overhead Marketing $ 19 per yard $15 per hour $ 4 per direct labor-hour 10 % of sales price Annual fixed costs Manufacturing Marketing Administration $41,000 $10,500 $35,000 The company faces two limits: (1) the volume of each type of shirt that it can sell (see maximum annual demand) and (2) 46,000 direct labor-hours per year caused by the plant layout. d-1. Calculate the contribution margin for each type of dress shirt using the table below Basic Classic S 900,000 Total revenue Less variable manufacturing costs Direct materials Direct labor Variable overhead Variable marketing 57,000 450,000 120,000 90,000 717,000 0S183.000 Total costs Contribution margin d-2. How much operating profit should your recommended product mix generate? (Round down "Units produced in Basics" to the nearest whole number.) e. Suppose that the company could expand its labor capacity by running an extra shift that could provide up to 12,500 more hours. The direct labor cost would increase from $15 to $18 per hour for all hours of direct labor used during the additional shift. What additional product(s) should Austin manufacture and what additional profit would be expected with the use of the added shift? (Round down "Units produced" to nearest whole number and final answer to 2 decimal places.) Austin should manufacture asic Additional profit would be
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