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Case #2 Breakaway Inc. manufactures three products at its plant in Minnedosa, Manitoba: Montage, Creek, and Pulse. In this facility, production is limited to 450,000
Case #2 Breakaway Inc. manufactures three products at its plant in Minnedosa, Manitoba: Montage, Creek, and Pulse. In this facility, production is limited to 450,000 machine hours per year. Direct material and direct labour costs are variable. To develop a production plan for the upcoming year, the company's accountant has compiled the following data: Montage Creek Pulse Total demand for 2021 350,000 350,000 350,000 Sales price per unit $20.00 $28.00 $24.00 Direct materials cost per unit $8.00 $9.00 $10.00 Direct labour cost per unit $4.00 $6.00 $5.00 Variable overhead cost per unit $4.00 $6.00 $5.00 Machine hours per unit 0.40 0.70 0.50 Required (A) Given the production constraint of 450,000 machine hours, what is the product mix that will maximize profits? (B) If the company authorizes overtime to produce more units, the direct labour cost per unit will increase by 50% due to an overtime premium. Materials cost and variable overhead cost per unit will be the same for overtime production as regular production. Should the company authorize the overtime? What would be the financial impact of doing so
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