Question 1 Sunland Innovations, Inc. produces exercise and fitness gear. Two of

Question

Question 1 Sunland Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this purpose. The machines have a maximum capacity of 6,000 machine hours, and no other products that the company makes use these machines Sarah Jacob, the company's operations manager, is preparing the production schedule for the coming month and can't seem to find enough machine time to produce enough units to meet the customer demand that the marketing department has included in the sales budget. Michael Stoner, the company's controller, has gathered the following information about the two products Dumbbell Weight Rack $52 21 Bench $61 16 8 Selling price per unit Direct materials Direct labor Variable overhead Fixed overhead Profit per unit Unit sales demand Machine hours per unit 5 $18 4,000 0.5 10 $21 7,000 0.8

Explanation / Answer

Dumbbell Rack Weight Bench Selling price 52 61 Less: variable cost Material' 21 16 Labour 5 8 Variable Overhead 3 6 Contribution per unit 23 31 Machine hour required per unit 0.5 0.8 Contribution per machine hour 46 38.75 Ranking I II Total Machine hours available 6000 hours Less Hours used in Dumbell 2000 hours (Max demand 4,000 units@0.50 hr per unit) Hours available for Weight bench 4000 hours Allocation of 6,000 machine hours is as follows: Dumbell rack 2000 hours Weight Bench 4000 hours

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