Hawaiian Nut Company The Hawaiian Nut Company (HNC) makes four different products from macadamia nuts grown in the Hawaiian Islands: chocolate-coated whole nuts (Whole), chocolate-coated nut clusters (Clusters), chocolate-coated nut crunch bars (Crunch), and plain roasted nuts (Roasted). The company is barely able to keep up with demand for these products. However, increasing raw materials prices and foreign competition are forcing HNC to watch its margins to ensure it is operating in the most efficient manner possible. To meet marketing demands for the coming week, HNC needs to produce at least 900 pounds of the Whole product, between 200 and 500 pounds of the Cluster product, no more than 150 pounds of the Crunch product, and no more than 250 pounds of the Roasted product. Each pound of the Whole, Cluster, Crunch, and Roasted product contains, respectively, 60%, 40%, 20% and 100% macadamia nuts with the remaining weight made up of chocolate coating. The company has 1,100 pounds of macadamia nuts and 800 pounds of chocolate available for use in the next week. The various products are made using four different machines that hull the nuts, roast the nuts, coat the nuts in chocolate (if needed), and package the product. The following table summarizes the time required by each product on each machine. Each machine has 60 hours of time available in the coming week. Minutes Required Per Pound Machine Whole Cluster Crunch Roasted Hulling 1.00 1.00 1.00 1.00 Roasting 2.00 1.50 1.00 1.75 Coating 1.00 0.70 0.20 0.00 Packaging 2.50 1.60 1.25 1.00 The controller recently presented management with the following financial summary of HNC's average weekly operations over the past quarter (next page). From this report, the controller is arguing that the company should cease producing its Cluster and Crunch products.Whole Cluster Crunch Roasted Total Sales Revenue $5, 125.00 $1,800.00 $500.00 $930.00 $8,355.00 Variable Costs Direct Materials $1,330.00 $560.00 $122.50 $320.00 $2,332.50 . Direct Labor $1,081.50 $400.00 $95.00 $130.00 $1,706.50 . Manufacturing $330.00 $140.00 $45.00 $90.00 $605.00 Selling & Administrative $550.00 $180.00 $65.00 $120.00 $915.00 Allocated Fixed Costs Manufacturing Overhead $659.72 $347.22 $104.17 $138.89 $1,250 S&A Overhead $554.17 $291.67 $87.50 $1 16.67 $1,050 Net Profit $620 ($1 19 ($19 $14 $496 Pounds Sold 950 500 150 200 1800 Net Profit Per Pound $0.65 $0.24 ($0.13 $0.07 $0.28