Question
Excel company manufactures custom plastic mouldings. Excel utilizes a fully automated injection moulding machine that is only operational 600 hours per month. This machine automatically
Excel company manufactures custom plastic mouldings. Excel utilizes a fully automated "injection moulding machine" that is only operational 600 hours per month. This machine automatically mixes the raw materials, heats, moulds, cures & packages the final product ready for shipping. Excel has 2 options for manufacturing next year. If it manufactures Product "R", it forecasts revenues of $40.00 per unit, variable costs of $18.00 per unit, and production of 200 units per injection moulding machine hour. If it manufactures Product "S", it forecasts revenues of $74.00 per unit, variable costs of $53.00 per unit, and production of 210 units per injection molding machine hour. Note that the difference in variable costs and production volumes between "R" & "S" are due to the type of plastic used, heating times & curing times. All other costs including all fixed costs for Product "R" & "S" are identical. Assuming it can sell as much as it makes of either product, what do you recommend to Excel in order to maximize operating incomes. only produce product "R" as it will result in higher operating incomes by $60,000 per month only produce product "R" as it will result in higher operating incomes by $6,000 per month only produce product "S" as it will result in higher operating incomes by $60,000 per month only produce product "S" as it will result in higher operating incomes by $6,000 per month
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