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E8-38B Identify constraint, then determine product mix (Learning Objective 6) BIGGym produces two types of exercise treadmills: Regular and Deluxe. The exercise craze is such
E8-38B Identify constraint, then determine product mix (Learning Objective 6) BIGGym produces two types of exercise treadmills: Regular and Deluxe. The exercise craze is such that BiGGym could use all of its available machine hours producing either model. The two models are processed through the same Production Department. Per Unit Deluxe Regular Sales price $990 $560 Costs: Direct materials $290 $100 Direct labour 188 Variable manufacturing overhead 172 Fixed manufacturing overhead* Variable operating expenses 115 61 Total cost 743 475 Operating income $247 $247 $ 85 *Allocated on the basis of machine hours. What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)
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