The truck assembly division of a large company produces two different models: the Aztec and the Bronco. Their basic operation consists of separate assembly departments: Drivetrain, Coachwork. Aztec final, and Bronco final. The Drive train assembly capacity is limited to a total of 4000 units per month, of either Aztecs or Broncos and it takes the same amount of time to assemble each. The Coachwork capacity each month is either 3000 Aztecs or 6000 Broncos. The Aztecs, which are vans, take twice as much time for Coachwork as the Broncos, which are pickups. The final assembly of each model is done in separate departments because of the parts availability system. The division can do the final assembly of up to 2500 Aztecs and 3000 Broncos each month.

The profit per unit on each model is computed by the firm as follows:

Problem 2 (Maximum Value)
Problem 2 (Number of Aztecs produced)
Problem 2 (Number of Broncos produced)
Problem 2 (Amount of Depreciation)

AZTEC BRONCO Selling Price $4,200 $4,000 $2,300 $400 $2,000 $450 Material Cost Labor Cost $2,700 $1,500 $2,450 $1,550 Sub Total Cost Gross Margin Selling & Administration Cost * Depreciation Cost ** Fixed Overhead Cost Variable Overhead Cost $210 $60 $50 $590 $200 $180 $150 $750 Sub Total Cost Profit Before Tax 910 $590 1,280 $270 * Variable cost based on 5% of selling price ** Variable unit cost, allocated according to a production of 1,000 Aztecs and/or Broncos which result $60 per vehicle or a production of 3,000 Aztecs and lor Broncos which result $180 per Vehicle. The relationship is linear The current value shown of $60 is based on 1000 Aztecs and $180 is based on 3000 broncos. These values are estimated Fixed overhead cost shown is in the form of unit price allocation based on production of 1,000 Aztecs and 3,000 Broncos