Exer Tread produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Exer Tread could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows: 1(Click the icon to view the data.) Read the requirements2. Requirement 1. What is the constraint? Exer Tread's constraint is machine hours . Requirement 2. Which model should Exer Tread produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Exer Tread should produce the product with the highest contribution margin per unit of the constraint . Now prepare the product mix analysis by starting with the contribution margin per unit. Deluxe Regular treadmill treadmill Sale price per unit Variable costs per unit Contribution margin per unit Next, calculate the proportion of machine hours used. Fixed overhead ÷ Total overhead = Proportion of machine hours used Deluxe Treadmill ÷ = % Regular Treadmill ÷ = % Finally, calculate the contribution margin per machine hour. Deluxe Regular treadmill treadmill Units that can be produced each machine hour Contribution margin per machine hour Requirement 3. If Exer Tread should produce both models, compute the mix that will maximize operating income. Exer Tread should produce (1) because (2) . 1: Data Table Per Unit Deluxe Regular Sales Price $1,030 $540 Costs: Direct materials 330 120 Direct labor 86 180 Variable manufacturing overhead 282 94 Fixed manufacturing overhead* 96 32 Variable operating expenses 113 61 Total costs 907 487 Operating income $123 $53 *allocated on the basis of machine hours 2: Requirements 1. What is the constraint? 2. Which model should Exer Tread produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) 3. If Exer Tread should produce both models, compute the mix that will maximize operating income.
Exer Tread produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Exer Tread could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows: 1(Click the icon to view the data.) Read the requirements2. Requirement 1. What is the constraint? Exer Tread's constraint is machine hours . Requirement 2. Which model should Exer Tread produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Exer Tread should produce the product with the highest contribution margin per unit of the constraint . Now prepare the product mix analysis by starting with the contribution margin per unit. Deluxe Regular treadmill treadmill Sale price per unit Variable costs per unit Contribution margin per unit Next, calculate the proportion of machine hours used. Fixed overhead ÷ Total overhead = Proportion of machine hours used Deluxe Treadmill ÷ = % Regular Treadmill ÷ = % Finally, calculate the contribution margin per machine hour. Deluxe Regular treadmill treadmill Units that can be produced each machine hour Contribution margin per machine hour Requirement 3. If Exer Tread should produce both models, compute the mix that will maximize operating income. Exer Tread should produce (1) because (2) . 1: Data Table Per Unit Deluxe Regular Sales Price $1,030 $540 Costs: Direct materials 330 120 Direct labor 86 180 Variable manufacturing overhead 282 94 Fixed manufacturing overhead* 96 32 Variable operating expenses 113 61 Total costs 907 487 Operating income $123 $53 *allocated on the basis of machine hours 2: Requirements 1. What is the constraint? 2. Which model should Exer Tread produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) 3. If Exer Tread should produce both models, compute the mix that will maximize operating income.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
Related questions
Concept explainers
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Topic Video
Question
Exer Tread
produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that
Exer Tread
could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows:1(Click
the icon to view the data.) Read the
requirements2.
Requirement 1. What is the constraint?
Exer Tread's
constraint is
machine hours
Requirement 2. Which model should
Exer Tread
produce?
(Hint:
Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)Exer Tread
should produce the product with the
highest contribution margin per unit of the constraint
Now prepare the product mix analysis by starting with the contribution margin per unit.
|
|
|
Deluxe
|
Regular
|
|
|
|
treadmill
|
treadmill
|
|
Sale price per unit
|
|
|
|
|
Variable costs per unit
|
|
|
|
|
|
Contribution margin per unit
|
|
|
Next, calculate the proportion of machine hours used.
|
|
Fixed overhead
|
÷
|
Total overhead
|
=
|
Proportion of machine hours used
|
|
|
Deluxe Treadmill
|
|
÷
|
|
=
|
|
%
|
|
Regular Treadmill
|
|
÷
|
|
=
|
|
%
|
Finally, calculate the contribution margin per machine hour.
|
|
|
Deluxe
|
Regular
|
|
|
|
treadmill
|
treadmill
|
|
Units that can be produced
|
|||
|
each machine hour
|
|
|
|
|
Contribution margin
|
|||
|
|
per machine hour
|
|
|
Requirement 3. If
Exer Tread
should produce both models, compute the mix that will maximize operating income.Exer Tread
should produce
(1)
(2)
.1: Data Table
|
|
Per Unit
|
|
|---|---|---|
|
|
Deluxe
|
Regular
|
|
Sales Price
|
$1,030
|
$540
|
|
Costs:
|
|
|
|
Direct materials
|
330
|
120
|
|
Direct labor
|
86
|
180
|
|
Variable manufacturing overhead
|
282
|
94
|
|
Fixed manufacturing overhead*
|
96
|
32
|
|
Variable operating expenses
|
113
|
61
|
|
Total costs
|
907
|
487
|
|
Operating income
|
$123
|
$53
|
|
*allocated on the basis of machine hours
|
2: Requirements
|
1.
|
What is the constraint?
|
|
2.
|
Which model should
Exer Tread
produce?
(Hint:
Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) |
|
3.
|
If
Exer Tread
should produce both models, compute the mix that will maximize operating income. |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Recommended textbooks for you
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.