Question
Four of Under Armour's product lines include training shoes, running shoes, basketball shoes and lifestyle shoes. The following discussion presents hypothetical information in regards to
Four of Under Armour's product lines include training shoes, running shoes, basketball shoes and lifestyle shoes. The following discussion presents hypothetical information in regards to the production of these shoes. This information assumes that these three product lines are manufactured on the same production line.
Training shoes | Running shoes | Basketball shoes | Lifestyle shoes | |
Monthly Demand | 80,000 | 120,000 | 150,000 | 50,000 |
Selling Price | $145.00 | $150.00 | $180.00 | $135.00 |
Direct Materials | $32.00 | $30.00 | $40.00 | $28.00 |
Direct Labour | $20.00 | $22.00 | $30.00 | $15.00 |
Variable Overhead | $20.00 | $22.00 | $30.00 | $15.00 |
Fixed Overhead Machine hours | $2.00 | $4.00 | $5.00 | $2.00 |
Required:
Assuming there are infinite machine hours, which product line should be the focus of the manufacturing efforts? Why? (2 Marks)
Assuming that production was constrained by machine hours, which product line should be the focus of the manufacturing efforts? Why? (2 Marks)
Assume that each month 325,000 machine hours are available. How many of each product line should be produced? (3 Marks)
Assume that the firm was approached by a manufacturer offering to produce the firm's shoe lines on their behalf. Briefly discuss the financial and non-financial factors that would be relevant when evaluating this proposal (3 Marks).
Ensure that your answers for the above are discussed and supported by relevant calculations/workings.
NOTE: Machine hours are not provided for each shoe type. Please answer based on the information provided.
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