Griswold produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Griswold could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows: B (Click the icon to view the data.) Read the requirements. ..... Requirement 1. What is the constraint? Griswold's constraint is machine hours Requirement 2. Which model should Griswold produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Griswold should produce the product with the highest contribution margin per unit of the constraint Now prepare the product mix analysis by starting with the contribution margin per unit. Deluxe Regular treadmill treadmill Sale price per unit $ 1,050 $ 620 Variable costs per unit Contribution margin per unit Data table Per Unit Deluxe Regular Sales Price $ 1,050 $ 620 Costs: Direct materials 320 130 Direct labor 86 180 270 90 Variable manufacturing overhead Fixed manufacturing overhead* 150 50 117 69 Variable operating expenses 943 519 Total costs $ 107 $ 101 Operating income Requirements 1. What is the constraint? 2. Which model should Griswold produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) 3. If Griswold should produce both models, compute the mix that will maximize operating income. Contribution margin per unit Next, calculate the proportion of machine hours used. Fixed overhead 1 Total overhead = Proportion of machine hours used % Deluxe Treadmill 11 Regular Treadmill = % Finally, calculate the contribution margin per machine hour. Deluxe treadmill Regular treadmill Units that can be produced each machine hour Contribution margin per machine hour