Chapter 8, Problem 8.51AP

Product mix decision under constraint (Learning Objective 5)

Agee Products, located in Peoria, Arizona, produces two lines of electric toothbrushes: Deluxe and Standard. Because Agee can sell all of the toothbrushes it produces, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data:

	Per Unit
	Deluxe Toothbrush	Standard Toothbrush
Sales price	$90	$46
Variable expenses	17	19
Contribution margin	$73	$27
Contribution margin ratio	81.1%	58.7%

After expansion, the factory will have a production capacity of 4,700 machine hours per month. The plant can manufacture either 56 Standard electric toothbrushes or 28 Deluxe electric toothbrushes per machine hour.

Requirements

1. 1. Identify the constraining factor for Agee Products.
2. 2. Prepare an analysis to show which product line to emphasize.