1. John Manufacturing assembled production information relating to its blenders and mixers, both of which are profitable regardless of where they are made. Prior experience indicates that variable overhead is $6.00 per direct labor hour. John has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Blender Mixer

Direct materials $6 $11

Direct labor 4 8

Factory overhead

@ $16 per direct

labor hour 16 32

Cost if purchased

outside 20 38

Annual demand 20,000 28,000

If 50,000 machine hours are available and John desires to follow an optimal strategy, he should

A) Produce 25,000 mixers and purchase all other units as needed.

B) Produce 20,000 blenders and 15,000 mixers and purchase all other units as needed.

C) Produce 20,000 blenders and purchase all other units as needed.

D) Produce all units from the outside supplier.