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 28 30,000 $ Classic 65 20,000 $ Formal 190 40,000 Sales price Maximum annual demand (units) Input requirement per unit Direct material Direct labor 0 0.4 yards 0.6 hours 0.2 yards 2 hours .5 yards 7 hours $ S S Costs Variable costs Malcrials Direct labor Factory overhead Marketing Annual fixed costs Manufacturing Marketing Administration 23 per yard 19 per hour 3 per direct labor-hour 10 % of sales price $46,000 $13,000 $40,000 The company faces two limits: (1) the volume of each type of shirt that it can sell (see maximum annual demand) and (2) 55,000 direct labor-hours per year caused by the plant layout. Required: 3-1. Assuming the company can satisfy the annual demand, calculate the contribution margin for each type of dress shirt using the table below Basic Classic Formal Total revenue Total variable costs Contribution margin a-2. How much operating profit could the company eam if it were able to satisfy the annual demand? Operating profit b-1. Compute the contribution margin for each shirt per the constrained resource, direct labor. (Do not round intermediate calculations. Round your final answers to 3 decimal places.) Basic Classic Formal Contribution margin b-2. Which of the three product lines makes the most profitable use of the constrained resource, direct labor? Classic Basic Formal c. Given the information in the problem so far, what product mix do you recommend? Classic and Basic Basic and Formal Classic and Formal d-1. Calculate the contribution margin for each type of dress shirt using the table below. Basic Classic Total revenue Less variable manufacturing costs: 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.) Operating profit e. Suppose that the company could expand its labor capacity by running an extra shift that could provide up to 15,000 more hours. The direct labor cost would increase from $19 to $21 per hour for all hours of direct labor used during the additional shift. What additional productis) 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 Additional profit would be
