23) Isabelle\'s Furniture manufactures a small table and a large table. The smal

Question

23) Isabelle's Furniture manufactures a small table and a large table. The small table sells for $700, has variable costs of $560 per table, and takes 10 direct labor hours to manufacture. The large table sells for $1,600, has variable costs of $970, and takes eight direct labor hours to manufacture. The company has a maximum of 5,000 direct labor hours per month when operating at full capacity. If there are no ales of either product, and the company could choose any proportions of product mix that what is the optimum product mix to maximize operating income of the company? A) 500 units of small and 625 units of large B) 0 units of small and 625 units of large C) 625 units of small and 500 units of large D) 500 units of small and 0 units of large

Explanation / Answer

Particulars Small Table Large Table Selling Price 700 1600 Variable Cost 560 970 Contribution Per Unit 140 630 Available Labour Hours 5000 5000 Direct Labour Hours 10 8 Number of units to be produced using labour hours 500 625 As the company has no constraint on Sales of Product, Let us Choose the higher Contribution generating and lower Direct labour using product of Large table So the Sales Mix to Maximise the Operating Income will be the option B 0 units of Small Table and 625 units of large table

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