This Question: 1 pt 5 of 5 (4 complete This Quiz: 5 pts possibl TreadMile produc

Question

This Question: 1 pt 5 of 5 (4 complete This Quiz: 5 pts possibl TreadMile produces two types of exercise treadmils Regular and Deluxe. processed through the same production department and Deluxe. The exercise craze and related demand is such that TreadMile could use all of its available machine hours producing either model. The two modebs are and rel (Click the icon to view the data) What product Prepare the product mix analysis. mix will maximize operating income? (Hint Use the allocation of fixed manufacturing overhead to determine the proportion of machine ho TreadMile Product Mix Analysis Deluxe Regular Treadlile should produce the product with the contribution margin per unit of the constraint hcose trom any list or enter any numbes in the input fields and then continue to the next question 142 AM 22201 O Type here to search

Explanation / Answer

Variable Costs per unit = Direct Materials+Direct Labor+Variable manufacturing Overhead+Variable Operating Exp.

Variable Costs per unit for Deluxe = $300+$76+$264+$123 = $763

Variable Costs per unit for Regular = $110+$178+$88+$63 = $439

Ratio of Fixed Manufacturing Overhead = Fixed MOH of Deluxe/Fixed MOH of Regular

= $138/$46 = 3:1

TreadMile

Product Mix Analysis (Amounts in $)

TreadMile should produce the product with the highest contribution margin per unit of the constraint. Three times as much overhead cost is allocated to each Deluxe model as to each Regular model. In Other words, it takes three times as many machine hours to produce a Deluxe model.

For each unit of the Deluxe model produced (contributin $277 per machine hour to operating income). TreadMile can produce three units of Regular Model (contributing $513 per machine hour to operating income). Therefore, TreadMile should produce only the Regular model.

Particulars Deluxe Regular Sale Price per unit 1,040 610 Less: Variable Costs per unit 763 439 Contribution margin per unit (A) 277 171 Units produced for equivalent no. of machine hours (B) 1 3 Contribution margin for equivalent no. of machine hours (A*B) 277 513

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