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Le Clerc 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 (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Leclerc'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 53 $ 76 50,000 50,000 Hours of constrained resource Total contribution margin $ 2,650,000 $ 3,800,000 0 Less: Lease costs of the high-precision machine 400,000 $ 2,650,000 $ 3,400,000 Net relevant benefit LeClerc should use its capacity to produce EX4 since the net relevant benefit is higher . The additional contribution from selling EX4 rather than A6 is enough to cover the additional costs of leasing the high-precision machine. Requirement 2. Suppose LeClerc can increase the annual capacity of its regular machines by 17,000 machine-hours at a cost of $170,000. Should Le Clerc increase the capacity of the regular machines by 17,000 machine hours? By how much will Le Clerc's oper Begin by calculating the benefit from only selling A6 or EX4 with the increased capacity of the regular machine. (Enter an amount in each input cell including zero balances.) A6 EX4 Contribution margin per hour of the constrained resource $ 53 $ 76 67,000 67,000 Hours of constrained resource Total contribution margin Less: Lease costs of the high-precision machine $ 3,551,000 $ 0 5,092,000 400,000 170,000 170,000 Cost of increasing capacity $ 3,381,000 $ 4,522,000 Net relevant benefit Should Le Clerc increase the capacity of the regular machines by 17,000 machine hours? By how much will LeClerc's operating income increase? LeClerc should income will increase by increase the capacity of the regular machine by 17,000 machine hours. LeClerc's operating 1253000 Data Table A6 EX4 Selling price $ 120 $ 180 Variable manufacturing cost per unit $ 55 $ 115 Variable marketing cost per unit $ 12 $ 27 Budgeted total fixed overhead costs $ 325,000 $ 700,000 Hours required to produce one unit on the regular machine 1.0 0.5 Additional information includes the following: a. LeClerc 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 $700,000 budgeted fixed overhead costs of EX4, $400,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because LeClerc 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