Question

Can you please help me with this managerial accounting problem?

GetFit produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that GetFit could use all of its available machine hours producing either model. The two models are processed through the same production department. (Click the icon to view the data.) What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Prepare the product mix analysis. i Data Table GetFit Product Mix Analysis Deluxe Regular Sale price per unit Per Unit Deluxe Regular 1,030 $ Variable costs per unit Sale price 590 Units produced with equivalent number of machine hours Less expenses: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable operating expenses 109 759 $ Total expenses Contribution margin for equivalent number of direct labor hours Contribution margin for equivalent number of machine hours Contribution margin per unit Fixed costs per unit Sale price per unit Units produced with equivalent number of direct labor hours Units produced with equivalent number of machine hours Variable costs per unit S 271 $ 53 Operating Income *Allocated on the basis of machine hours Print Done

Answer 1

Since machine hours is the constraint, contribution margin per machine hour should be maximised
	Deluxe	Regular
Sale Price per unit	1,030.00	590.00
Variable costs per unit	663.00	489.00
Contribution Margin per unit	367.00	101.00
Units produced with equivalent number of machine hours	2.00	1.00
Contribution margin for equivalent number of amchine hours	183.50	101.00
Since contribution margin per equivalent unit is higher for Deluxe
All machine hours should be used in the production of Deluxe

1 Since machine hours is the constraint, contribution margin per machine hour should be maximised 2 3 Sale Price per unit 4 Variable costs per unit 5 Contribution Margin per unit 6 Units produced with equivalent number of machine hours 7 Contribution margin for equivalent number of amchine hours Deluxe Regular 1030 590 =310+88+156+109 =160+184+78+67 | =B3-B4 =C3-C4 =96/48 =48/48 =B5/B6 =C5/C6 8 9 Since contribution margin per equivalent unit is higher for Deluxe 10 All machine hours should be used in the production of Deluxe