Hernon Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Hernon's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. Data table Additional information includes the following: a. Hernon faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $725,000 budgeted fixed overhead costs of EX $400,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Hernon uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. Requirements 1. What product mix - that is, how many units of A6 and EX4 - will maximize Hernon's operating income? Show your calculations. 2. Suppose Hernon can increase the annual capacity of its regular machines by 18,000 machine-hours at a cost of $144,000. Should Hernon increase the capacity of the regular machines by 18,000 machine hours? By how much will Hernon's operating income increase or decrease? Show your calculations. 3. Suppose that the capacity of the regular machines has been increased to 68,000 hours. Hernon has been approached by Curran Corporation to supply 22,000 units of another cutting tool, V2, for $118 per unit. Hernon must either accept the order for all 22,000 units or reject it totally. V2 is exactly like A6 except that its variable manufacturing cost is $55 per unit. (It takes 1 hour to produce one unit of V2 on the regular machine, and variable marketing cost equals $12 per unit.) What product mix should Hernon choose to maximize operating income? Show your calculations