Question

Total fixed costs are $60,000. Marketing data indicate that the company can sell up to 8000 units of the Bedford Lamp and up to 4000 units of the Lowell Lamp. Machine hour capacity is 25,000 hours per year. Which product mix will deliver the optimum operating income? 8000 Bedford Lamps and 4000 Lowell Lamps 4000 Bedford Lamps and zero Lowell Lamps 8000 Bedford Lamps and 2250 Lowell Lamps 4000 Bedford Lamps and 1000 Lowell Lamps You must show your work for your selection for credit.

Answer 1

Answer:

____8,000____units of Bedford lamp and ____4,000_______units of Lowell Lamp

Explanation

8,000 units of Bedford lamp X 2 machine hours = 16,000 machine hours.

4,000 units of Lowell lamp X 4 machine hours = 8,000 machine hours.

Answer 2

MISSING INFORMATION:

                Bedford Lowell

Sales price        $25     $35

Variable costs     $17     $23

Machine hours       2       4

Answer:

8000 Bedford Lamps and 2250 Lowell Lamps

Explanation:

$\left[\begin{array}{ccc}&Bedford&Lowell&\\ Revenue&25&35&\\ Cost&17&23&\\ CM&8&12&\\ Constrain resource&2&4&\\ CM per constrain&4&3&\\\end{array}\right]$

As Bedford makes a better use of the machine hou we prioritize their production:

8,000 units x 2 hours each = 16,000

then, 25,000 - 16,000 = 9,000

his 9,000 hours are dedicate to do Lowell:

9,000 / 4 = 2,250 units