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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. Basic $ 30 20,000 Classic $ 64 10,000 Formal $ 190 30,000 Sales price Maximum annual demand (units) Input requirement per unit Direct material Direct labor 0.5 yards 0.7 hours 0.3 yards 2 hours 0.6 yards 7 hours $ $ $ Costs Variable costs Materials Direct labor Factory overhead Marketing Annual fixed costs Manufacturing Marketing Administration 20 per yard 16 per hour 4 per direct labor-hour 10 % of sales price $36,000 $ 8,000 $30,000 The company faces two limits: (1) the volume of each type of shirt that it can sell (see maximum annual demand) and (2) 30,000 direct labor-hours per year caused by the plant layout. Suppose that the company could expand its labor capacity by running an extra shift that could provide up to 10,000 more hours. The direct labor cost would increase from $16 to $19 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.)
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