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Help! Exer Tread produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that ExerTread could use all
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Exer Tread produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that ExerTread could use all of its available machine hours producing either model. The two models are processed through the same production department. (Click the icon to view the data.) What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Prepare the product mix analysis. Exer Tread Data Table Product Mix Analysis Deluxe Regular Sale price per unit A B Variable costs per unit 1 Per Unit Contribution margin per unit 2. Deluxe Regular Units produced with equivalent number of machine hours 3 Sale price $ 980 $ 610 Contribution margin for equivalent number of machine hours 4 Less expenses: 5 Direct materials 330 150 6 Direct labor 84 186 7 176 88 Variable manufacturing overhead Fixed manufacturing overhead* 8 96 48 9 Variable operating expenses 109 61 10 Total expenses $ 795 $ 533 $ 185/$ 77 11 Operating income *Allocated on the basis of machine hoursStep by Step Solution
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