Question
Sicon Containers produces restaurant storage containers. The company makes two sizes of containers: regular (55 gallon) and large (100 gallon). Demand for the products is
Sicon Containers produces restaurant storage containers. The company makes two sizes of containers: regular (55 gallon) and large (100 gallon). Demand for the products is so high that Sicon can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can be run for only 2,500 hours per period. Sicon can produce 20 regular containers every hour, whereas it can produce 8 large containers in the same amount of time. Fixed costs amount to $250,000 per period. Sales prices and variable costs are as follows:
Per Unit | Regular | Large |
Sales Price | $105 | $225 |
Variable Costs | 28 | 42 |
To maximize profits, how many of each size container should Sicon produce? Given this product mix, what will the company's operating income be?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started