Determine the optimal production plan for the equipment division. Should any divisions be dropped?What qualitative factors need to be considered when dropping a division(s)?

Viper Kai Fitness Incorporated (VKF) is a general fitness studio operator and fitness equipment The facility is rented with a fixed lease that is inclusive of utilities. Variable overhead costs for manufacturer founded by Jackie Lawrence. The company operates 10 fitness studios across the production of electronic equipment are negligible. Jackie has identified total fixed costs for California. The company also manufactures a line of Viper Kai fitness equipment that includes the entire equipment division of $1.375 million with $725,000 of those fixed costs occurring treadmills, stationary bikes, ellipticals, and stair climbers. These are sold at the 10 studios, regardless of the level of production or if product lines are dropped. In the current production online, small fitness stores and through mass merchandisers including Wal-Mart. plan, $225,000 of the $725,000 has been allocated to the treadmill product line, $200,000 to stationary bikes, $150,000 to ellipticals, and $150,000 to the stair climber product line. The Jackie wants your help analyzing the equipment division of the company. The division currently methodology for this cost allocation is unclear. Out of the remaining fixed costs, 35% can be produces four product lines: treadmills, stationary bikes, ellipticals, and stair climbers. The attributable to treadmills, 20% to stationary bikes, 25% to stair climbers, and 20% to ellipticals. treadmill is the main product produced and sold by VKF, generating more than half its revenue. If a product line is dropped, these attributable fixed costs can be saved. The sales & marketing team focuses on promoting treadmills and, to a lesser extent, stationary bikes, because they are at higher price points. The lower priced Elliptical and Stair climber The sales team has estimated the following limits on demand (i.e., the maximum demand) for product lines are currently unprofitable, and Jackie is considering dropping them completely. each product line for the next annual period Important information for each product on a per unit basis is in the table below: Treadmills Stationary Bikes Elliptical Stairclimbers Treadmills Stationary Bikes Elliptical Stairclimbers Maximum demand 1,000 1,250 1,100 1,400 Sales Price $1,500.00 $900.00 $675.00 $550.00 Weight 200.00 lbs 152.00 lbs 100.00 lbs 120.50 lbs Direct labourers earn $25 per hour in the production facility. The salaries for the sales team and Current Production 1,000 units 750 units 600 units 400 units supervisors have been included in the fixed costs and are flat except for a 5% commission on all sales that is received by the sales team for every unit sold. This sales commission is not included The non-electronic components of the fitness equipment are welded, assembled, and finished in fixed costs. in a small production facility with 4 direct labourers who can work up to 40 hours a week for 50 weeks a year. The composite material required for treadmills averages $2.00 per pound and Adam Prokop (2021) $1.25 per pound for stationary bikes. Ellipticals and stair climbers use cheaper material that is half the cost on a per pound basis of the material used to build treadmills. VKF only has the ability to purchase 700,000 lbs of total material annually for production in the facility. QUESTION: Furthermore, VKF is not able to fit more that 4 workers at a time into the facility and lacks the Determine the optimal production plan for the equipment division. Should any divisions be capital or desire to expand the facility floor space. Workers are contracted on an hourly basis dropped? What qualitative factors need to be considered when dropping a division(s)? Please which provides flexibility and reduces underutilized hours. explain. Treadmills are bulkier and have more moving parts, so they require an average of 3 direct labour hours to build each unit. Elliptical and stair climbers have less components and only require an average of 1 direct labour hour each per unit. Stationary bikes require two hours of direct labour per unit. The electronic components of the fitness equipment (mainly the motors or resistance mechanisms) are produced using specialized equipment within the facility. The design and mechanisms of the motor are similar across the four products, so the same machine can be utilized to manufacture the electronic components for all four products. The average per unit cost of materials for the electronic component is $150 for treadmills, $100 for stationary bikes, $75 for ellipticals and $75 for stair climbers. Furthermore, one treadmill requires 3.5 machine hours for the electronic component, stationary bikes require 2 machine hours per unit, ellipticals 1.75 machine hours per unit, and stair climbers 1.25 machine hours per unit. The current production utilizes the full practical capacity available for the specialized equipment in terms of machine hours