Question
Pappy's Toys makes two models of a metal toyStandard and DeLuxe. Both models are produced on a single machine. The price and costs of the
Pappy's Toys makes two models of a metal toyStandard and DeLuxe. Both models are produced on a single machine. The price and costs of the two models appear as follows.
Standard | DeLuxe | ||||||
Price per unit | $ | 60 | $ | 80 | |||
Variable cost per unit | $ | 28 | $ | 32 | |||
Machine hours per unit | 0.5 | 1.5 | |||||
The one machine that used to produce both models has a capacity of 94,000 machine-hours per quarter. Fixed manufacturing costs per quarter are $820,000.
Required:
a. Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 208,000 units of each product. How many units of each model should Pappy's produce in a quarter?
b. Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 122,000 units of each product. How many units of each model should Pappy's produce in a quarter?
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