Sullivan 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: Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Sullivan'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 Hours of constrained resource Less: Net relevant benefit Sullivan should use its capacity to produce since the net relevant benefit is V. The additional contribution from selling EX4 rather than A6 is to cover the additional costs of leasing the high-precision machine. Requirement 2. Suppose Sullivan can increase the annual capacity of its regular machines by 13,000 machine-hours at a cost of $65,000. Should Sullivan increase the capacity of the regular machines by 13,000 machine hours? By how much will Sullivan's operating income increase or decrease? Show your calculations. 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 Hours of constrained resource Less: Cost of increasing capacity Net relevant benefitSullivan 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 Should Sullivan increase the capacity of the regular machines by 13,000 machine hours? By how much will Sullivan's operating income increase? Sullivan increase the capacity of the regular machine by 13,000 machine hours. Sullivan's operating income will increase by Requirement 3. Suppose that the capacity of the regular machines has been increased to 63,000 hours. Sullivan has been approached by Burn Corporation to supply 15,000 units of another cutting tool, V2, for $118 per unit. Sullivan must either accept the order for all 15,000 units or reject it totally. V2 is exactly like A6 except that its variable manufacturing cost is $55 per unit. (It takes one hour to produce one unit of V2 on the regular machine, and variable marketing cost equals $12 per unit.) What product mix should Sullivan choose to maximize operating income? Show your calculations. First, determine the amount that should be used to determine if Sullivan should accept Burn's order. As EX4 V2 Sullivan V accept Bum's order. Next. determine the product mix for A6 and EX4 that will maximize operating income along with the decision you made about Bum's order. (Enter an amount in each input cell including zero balances.) A6 EX4 x Hours of constrained resource Less: Net relevant benet What product mix should Sullivan choose to maximize operating income? (Enter an amount in each input cell, including zero balances.) Based on the above calculations, the product mix that maximizes operating income is units of V2, units of A6, and units of EX4. Sullivan 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. X - X Requireme Requirements ome Data table Begin by ca 1. What product mix - that is, how many units of A6 and EX4 - will maximize A6 EX4 Sullivan's operating income? Show your calculations. Selling price 105 $ 170 2. Suppose Sullivan can increase the annual capacity of its regular machines by Ho 13,000 machine-hours at a cost of $65,000. Should Sullivan increase the Variable manufacturing cost per unit EA 50 $ 120 capacity of the regular machines by 13,000 machine hours? By how much will Variable marketing cost per unit 12 $ 27 Sullivan's operating income increase or decrease? Show your calculations. Less: 3. Suppose that the capacity of the regular machines has been increased to Budgeted total fixed overhead costs 375,000 $ 615,000 63,000 hours. Sullivan has been approached by Burn Corporation to supply 15,000 units of another cutting tool, V2, for $118 per unit. Sullivan must either Hours required to produce one unit on the regular machine 1.0 0.5 Net relevar accept the order for all 15,000 units or reject it totally. V2 is exactly like A6 Additional information includes the following: Sullivan she except that its variable manufacturing cost is $55 per unit. (It takes 1 hour to ition a. Sullivan faces a capacity constraint on the regular machine of 50,000 hours per year. produce one unit of V2 on the regular machine, and variable marketing cost b. The capacity of the high-precision machine is not a constraint. equals $12 per unit.) What product mix should Sullivan choose to maximize Requireme c. Of the $615,000 budgeted fixed overhead costs of EX4, $290,000 are lease payments for the will Sullivan operating income? Show your calculations. urs a high-precision machine. This cost is charged entirely to EX4 because Sullivan uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine Begin by ca hter a at any time without penalties. d. All other overhead costs are fixed and cannot be changed. Print Done Ho Print Done