Exercise 11.6

Silent Air manufactures two different models of ceiling fans. The standard model and the deluxe model with the following selling and cost details:

Silent Air Ceiling Fans

Standard

Deluxe

$ per unit

$ per unit

Selling price

90

150

Direct material

29

65

Direct labour

15

30

Manufacturing overhead @$45 per machine hour

$45

$90

Monthly demand (Units)

25,000

30,000

Hint: Use manufacturing overhead to calculate the number of machine hours required for each product.

The fixed manufacturing overhead component included in the above unit costs is $30 per machine hour. Just as the summer season began in November, a major rainstorm caused a flash flood and damaged one of the two production lines at Silent Air's plant. It will take one month for repairs to be completed on the damaged production line and therefore for the next month, the plant, even working overtime on a single production line has a capacity of 55,000 machine hours.

Required:

Determine how many units of each product should be produced in November to maximise profitability of using the limited resource of machine hours.