ExerLight produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that could use all of its available machine hours producing either model. The two models are processed through the same production department. Per Unit
Deluxe Regular
Sale price $1,020 $560
Costs
Direct materils $290 $90
Direct labor 168 60
Variable manufacturing overhead:($240) ($80)
Fixed manufacturing overhead: ($126) ($42)
Variable operating expenses: ($117) ($69)
Total cost: ($885) ($465)
Operating income: ($125) ($95)
allocated
What product mix will maximize operating income? Prepare the product mix analysis.
ExerLight should produce the product with thecontribution margin per unit of the constraint. times as much overhead cost is allocated to each Deluxe model as to each Regular model. In other words, it takestimes as many machine hours to produce a Deluxe model. For each unit of the Deluxe model produced (contributing $to operating income). ExerLight can produceunits of the Regular model (contributing $to operating income). Therefore. ExerLight should produce.