Question

The senior management at Davis Watercraft would like to determine if it is possible to improve firm profitability by changing their existing product mix. Currently, the product mix is determined by giving resource priority to the highest contribution margin watercrafts. Davis Watercraft always has a contingent of 10 workers on hand; each worker is paid $28 per hour. Overhead costs are $12,000 per week. The plant operates 18 hours per day and 6 days per week. Labor is considered a fixed expense because workers are paid for their time regardless of their utilization. The production manager has determined that workstation 1 is the bottleneck. Detailed production information is provided below. Model S380 $50 Price Material costs Weekly demand Processing Time Station 1 Processing Time Station 2 Processing Time Station 3 Processing Time Station 4 S335 $45 S410 $100 36 a. Using the traditional method, which bases decisions solely on a product's contribution to profits and overhead, what is the product mix that yields the highest total profit? (Enter your responses rounded to the nearest whole number.) Product mix

Answer 1

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