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Lifemaster produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that Lifemaster could use all of
Lifemaster produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that Lifemaster 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.) Lifemaster Product Mix Analysis Deluxe Regular Lifemaster should produce the product with the contribution margin per unit of the constraint. times as much overhead cost is allocated to each Deluxe model as to each Regular model. In other words, it takes times as many machine hours to produce a Deluxe model. For each unit of the Deluxe model produced (contributing per machine hour to operating income), Lifemaster can produce units of the Regular model (contributing per machine hour to operating income). Therefore,
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