Rushton Precision Tools Makes Cutting Tools For Metalworking Operations. It Makes Two Types Of Tools: A6, A Regular Cutting Tool, And EX4, A High-Precision Cutting Tool. A6 Is Manufactured On A Regular Machine, But EX4 Must Be Manufactured On Both The Regular Machine And A High-Precision Machine. The Following Information Is Available: E (Click To View The

 

 

Rushton Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Rushton's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. A6 EX4 Contribution margin per hour of the constrained resource 28 18 Data Table 50,000 50,000 Hours of constrained resource Total contribution margin $ 1,400,000 Less: Lease costs of the high-precision machine $ 1,400,000 900000 350,000 550000 Selling price Net relevant benefit Variable manufacturing cost per unit Variable marketing cost per unit Budgeted total fixed overhead costs Hours required to produce one unit on the regular machine Additional information includes the following: A6 EX4 $ 80 $ 155 $ 40 $ 110 $ 12 $ 27 400,000 $ 1.0 575,000 0.5 a. Rushton faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $575,000 budgeted fixed overhead costs of EX4, $350,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Rushton uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. Print Done