Question
Dion Garments manufactures two types of premium leather jackets, a Model Alpha and a Model Beta. Cost and revenue data for each model is shown
Dion Garments manufactures two types of premium leather jackets, a Model Alpha and a Model Beta. Cost and revenue data for each model is shown below:
| Model Alpha | Model Beta |
Selling price per unit | $80 | $100 |
Variable cost per unit | $56 | $50 |
Currently, the production facility that makes these jackets is operating at full capacity. The company is currently using all the available sewing machine hours which is 10,000 hours per month. Model Beta requires 2 hours of sewing machine time (due to intricate design features) while Model Alpha requires 0.8 hours of sewing machine time. Demand is 4,000 and 4,500 units for Model Alpha and Model Beta respectively. Required:
a. Which model should the company focus on given the constraint with machine hours? Use calculations to support your answer.
b. Senior management has advised that a minimum of 2,500 units should be made of each model. Calculate the total number of units of each model to produce.
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