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Ombrelloni Felici (OF) has a division of folding umbrellas which can produce two different types of umbrellas, the Ombrelli Divertenti, which is made of polyester
Ombrelloni Felici (OF) has a division of folding umbrellas which can produce two different types of umbrellas, the Ombrelli Divertenti, which is made of polyester fabric, and the Ombrelli Sicuri, which is made of flame- resistant fabric. The company has 10,000 machine hours available to produce these products. Table 5-Straw Production Per batch Ombrelli Divertenti Ombrelli Sicuri Sales price $2.00 $6.00 Variable expenses $0.50 $3.00 Contribution margin $1.50 $3.00 Contribution margin ratio 75% 50% Page 6 of 9 One batch of Ombrelli Divertenti requires 5 machine hours and one batch of Ombrelli Sicuri requires 8 machine hours. Required How many of each product should Ombrelloni Felici (OF) produce for maximizing the profit of the division of folding umbrellas and why? Use your calculations for supporting your argument and showing the maximum profit the division of folding umbrellas can achieve. (Product-mix decisions under capacity constraints, 10 marks)
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