Problem 4-17 (Part Level Submission) (a) Problem 4-17 (Part Level Submission) Fl

Question

Problem 4-17 (Part Level Submission)

(a)

Problem 4-17 (Part Level Submission)

Fleet Valley Shoes produces two models:the Nx100 (a shoe aimed at competitive runners) and the Mx100 (a shoe aimed at fitness buffs). Sales and costs for the most recent year are indicated:
Nx100 Mx100 Sales (pairs) 20,900 79,400 Sales $2,955,000 $8,827,000 Variable costs (746,200 ) (1,192,000 ) Contribution margin 2,208,800 7,635,000 Fixed costs (20,100 ) (1,460,000 ) Profit $2,188,700 $6,175,000 Assembly time per pair 3 hours 2 hours Profit per assembly hour $34.91 $38.89 CM per assembly hour $35.23 $48.08

Explanation / Answer

Total Assembly hours Available 197000 Less: Assemble Hrs Required for: Nx100 = 3700 Pairs X 3 Hrs 11100 Mx100 = 3700 Pairs X 2 Hrs 7400 Balance Assembly Hrs 178500 Mx100 - No of extra Units Produced 89250 (178500 hrs / 2 Hrs) Since Contribution margin per Assembly Hour of Mx100 ($48.08) is higher than Nx100 ($35.23), so the company should produce Mx100 to maximise its profit. Total No. of Units Produced Nx100 Mx100 Minimum Units          3,700            3,700 Extra Units Produced                 -            89,250 Total No. Of Units produced          3,700          92,950

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