How To Maximize Profits With Only Marginal Increase Of Machine Utilization
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