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Question
Pete’s Premium Pistols Ltd. manufactures three different products –handguns, rifles, and shotguns. Considerable market demand exists for all models. The following per unit data apply:
|
|
Handguns |
Rifles |
Shotguns |
|
Selling price |
$150 |
$20 |
$85 |
|
Direct materials |
100 |
8 |
40 |
|
Direct labour ($20 per hour) |
20 |
5 |
10 |
|
Variable support costs ($4 per machine hour) |
9 |
1.8 |
10.8 |
|
Fixed costs |
8 |
4 |
20 |
|
Total expenses |
138 |
19 |
82 |
|
Net income |
$12 |
$1 |
$3 |
Required:
If machine utilization can only be increased by 10%, what should the company do to maximize profits?
Summary
The question belongs to Accounting and it discusses about maximizing profits on a machine when only 10% of the utilization is increased.
Total Word Count 108
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