Problem 4-64 Optimum Product Mix-Excel Solver (LO 4-4)

Slavin Corporation manufactures two products, Alpha and Delta. Each product requires time on a single machine. The machine has a monthly capacity of 500 hours. Total market demand for the two products is limited to 170 units (each) monthly. Slavin is currently producing 115 Alphas and 115 Deltas each month. Cost and machine-usage data for the two products are shown in the following table, which Slavin managers use for planning purposes:

	Alpha			Delta			Total
Price	$	125		$	155
Less variable costs per unit
Material		17			32
Labor		23			35
Overhead		14			14
Contribution margin per unit	$	71		$	74
Fixed costs
Manufacturing							$	7,400
Marketing and administrative							$	4,400
							$	11,800
Machine hours per unit		2.0			2.5
Machine hours used								495
Machine hours available								500
Quantity produced		115			115
Maximum demand		170			170
Profit	$	4,875

Required:

a. What is the optimal production schedule for Slavin? In other words, how many Alphas and Deltas should the company produce each month to maximize monthly profit?

b. If Slavin produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?