Question

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ExerLight produces two types of exercise treadmills: Regular and Deluxe. The exercise craze is such that ExerLight 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. ExerLight Product Mix Analysis Sale price per unit Deluxe $1,030 737 Regular 580 469 Variable costs per unit Contribution margin per unit Units produced with equivalent number of machine hours Contribution margin for equivalent number of machine hours ExerLight should produce the product with the contribution margin per unit of the constraint. v times as much overhead cost is allocated to each Deluxe model as to each Regular model. In other words, it takes times as many machine hours to produce a Deluxe model.

Options are Highest or lowest

two or four or five

only one deluxe or only the deluxe model or two times as many deluxe model as regular models or two times as many regular models as deluxe models

Answer 1

Sales	$      1,030	$       580
Direct Material	$         350	$ 100
Direct labor	$           88	$       198
Variable Manufacturing overhead	$         184	$         92
Variable selling expenses	$         115	$         79
Total Variable cost	$         737	$       469
Contribution per unit = Sales - variable cost	$         293	$       111
units that can be produced each machine hour	2.00	1.00
contribution margin per machine hour	$   146.5	$       111

Highest

two

$293

2 units

$141

only the deluxe model