Making Decisions Constrained Resource
Lattie-Dah, Inc., is a small company that manufactures three versions of outdoor hammock. Unit information for its products follows:
| Hammock A | Hammock B | Hammock C |
Sales price | $30 | $40 | $50 |
Direct materials | 6 | 7 | 8 |
Direct labor | 1 | 3 | 7 |
Variable manufacturing overhead | 2 | 2 | 2 |
Fixed manufacturing overhead | 3 | 4 | 5 |
Required number of labor hours | 0.10 | 0.30 | 0.75 |
Required number of machine hours | 3 | 2.50 | 2.0 |
Lattie-Dah has determined that it can sell a limited number of each hammock in the upcoming year. Expected demand for each model follows:
Hammock A | 50,000 units |
Hammock B | 20,000 units |
Hammock C | 30,000 units |
Required:
1. Suppose that direct labor hours has been identified as a constrained resource with a maximum of 26,000 hours available per year. Assuming an infinite demand for each of Lattie-Dah’s products, determine the company’s preferred production. Justify your answer.
2.If the number of direct labor hours is the only constrained resource, determine the number of units of each hammock that Lattie-Dah should produce to maximize its profit.
3.Suppose that the number of machine hours has been identified as the only constrained resource with a maximum of 230,000 hours available per year. Assuming unlimited demand for each of Lattie-Dah’s products, determine the company’s preferred production. Justify your answer.
4.If the number of machine hours is the only constrained resource, determine the number of units of each hammock that Lattie-Dah should produce to maximize its profit.
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