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: a (Click to view the information.) Requirements Read the gum. . What product mix- that is, how many units of A6 and EX4 - will maximize Sullivan's operating income? Show your calculations. Requirement 1. What product mix- that is, how many units of A6 and EX4 - will maximize Sullivan's operating income? Show your calc - SUPPOSS Sullivan can increase "'5 annual CBPBCW 0f \"5 regular machines by 13,000 machine-hours at a cost of $65,000. Should Sullivan increase the Begin by calculating the benet from only selling A6 or EX4. capacity of the regular machines by 13,000 machine hours? By how much will Sullivan's operating income increase or decrease? Show your calculations, A6 EX4 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 x Hours of constrained resource 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 1 hour to produce one unit of V2 on the regular machine, and variable marketing cost Less: equals $12 per unit.) What product mix should Sullivan choose to maximize operating income? Show your calculations. Net relevant benet Sullivan should use its capacity to produce since the net relevant benet is 7 . The additional contribution from selling EX4 Requirement 2. Suppose Sullivan can increase the annual capacity of its regular machines by 13,000 machine-hours at a cost of 365,0: will Sullivan's operating income increase or decrease? Show your calculations. Begin by calculating the benet from only selling A6 or EX4 with the increased capacity of the regular machine. (Enter an amount in eac A6 EX4 x Hours of constrained resource Less: ' Sullivan Precision Tools makes cutting tools for metalworking operations, It makes two types of tools: A6, a both the regular machine and a high-precision machine. The following information is available: a (Click to view the information.) Read the @uirements. Sullivan increase the capacity of the regular machine by 13,000 machine hours. Sulliva income will increase by Requirement 3. Suppose that the capacity of the regular machines has been increased to 63,000 hours. Sui accept the order for all 15,000 units or reject it totally. V2 is exactly like A6 except that its variable manufactu 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. A6 EX4 V2 Selling price 105 3 Variable manufacturing cost per unit 50 $ Variable marketing cost per unit 12 $ Budgeted total xed overhead costs 375,000 5 Hours required to produce one unit on the regular machine 1.0 Additional information includes the following: a. Sullivan 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 $615,000 budgeted fixed overhead costs of EX4, $290,000 are lease payments for the 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 at any time without penalties. d. All other overhead costs are xed and cannot be changed. 170 120 27 615,000 0.5 Sullivan 7 accept Burn's order. Next, determine the product mix for A6 and EX4 that will maximize operating income along with the decision A6 EX4 x Hours of constrained resource Less: Net relevant benet red on t either $12 per