Question
LawnMate Company produces two types of lawnmowers, A and B. While the company has spare machine hours there is always a shortage in direct labour
LawnMate Company produces two types of lawnmowers, A and B. While the company has spare machine hours there is always a shortage in direct labour hours. The general manager calls a meeting of selected managers to discuss the companys product mix and asks you to attend. At the meeting there is some disagreement on the subject. The sales manager points out, there is a larger contribution margin on Product A, and therefore the company should manufacture only A. The factory manager argues, Both products are well accepted in the market place and both take the same amount of machining time. Consequently, we should produce equal quantities of A and B to use up factory capacity. The finishing manager argues, Product B only takes half as long direct labour time to finish as A, but its contribution margin is not much less than As. Therefore, it is logical to concentrate on B, producing the maximum number possible, and devoting any surplus capacity to A. Required: The General Manager asks you to discuss what will be the optimal product mix and comment on the each of three managers suggestions.
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