Excellent Corporation manufactures three products at its plant. The plant capacity is limited to

75,000

machine hours per year on a single-shift basis. Direct material and direct labor costs are variable. The following data are available for planning purposes:

Requirements

(a)	Given the capacity constraint, determine the production levels for the three products that will maximize profits.
(b)	If the company authorizes overtime in order to produce more units of XL3, the direct labor cost per unit will be higher by 50% because of the overtime premium. Materials cost and variable overhead cost per unit will be the same for overtime production as regular production. Is it worthwhile operating overtime?

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Part 1

Requirement (a) Given the capacity constraint, determine the production levels for the three products that will maximize profits.

Begin by calculating the contribution margin per machine hour for each product. (Abbreviations used: MH = Machine hour)

	XL1	XL2	XL3
Contribution margin per MH