StoreAway produces plastic storage bins for household storage needs. The company makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product used to be so high that the company could sell as many of each size as it could produce. The same machinery is used to produce both sizes. The machinery is available for only 3,200 hours per period. The company can produce 11 Large bins every hour compared to 20 Regular bins in the same amount of time. Fixed expenses amount to $95,000 per period. Product mix data follows Click the icon to view the product mix analysis.) (Click the icon to view the operating income from the optimal product mix.) Assume that demand for Regular bins is limited to 36,000 units and demand for Large bins is limited to 22,000 units. 1. How many of each size bin should the company make now? 2. Given this product mix, what will be the company's operating income? 3. Explain why the operating income is less than it was when the company was producing its optimal product mix. 1. How many of each size bin should the company make now? This is a product mix decision. First determine which bin size StoreAway should emphasize. StoreAway should emphasize the production of Regular size bins since they are more profitable than the Large Decision: StoreAway should produce size bins Regular size bins andLarge size bins. Reference StoreAway Product Mix Analysis Large Regular 10.20 4.60 5.60 8.20 3.00 5.20 Sales price per unit Less: Variable cost per unit Contribution margin per unit Units per machine hour Contribution margin per machine hour 20x $ 104.00 $ 61.60 G Reference StoreAway Operating Income from Optimal Product Mix Number of bins per period Contribution margin per bin Total contribution margin Less: Fixed expenses Operating income 64,000 $5.20 $ 332,800 95,000 $ 237,800