Lifemaster produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that Lifemaster could use all of its available machine hours producing either model. The two models are processed through the same production department. ABC1 Per Unit2 DeluxeRegular3Sale price$1,020$5804Less expenses: 5Direct materials2801006Direct labor921847Variable manufacturing overhead246828Fixed manufacturing overhead*114389Variable operating expenses1196110Total expenses$851$46511Operating income$169$115*Allocated on the basis of machine hours What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Prepare the product mix analysis.

Variable costs are costs that vary with the change in the level of output whereas fixed costs are…

Answered: Lifemaster produces two types of…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

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Lifemaster produces two types of exercise treadmills: Regular and Deluxe. The exercise craze and related demand is such that Lifemaster could use all of its available machine hours producing either model. The two models are processed through the same production department.

	A	B	C
1		Per Unit
2		Deluxe	Regular
3	Sale price	$1,020	$580
4	Less expenses:
5	Direct materials	280	100
6	Direct labor	92	184
7	Variable manufacturing overhead	246	82
8	Fixed manufacturing overhead*	114	38
9	Variable operating expenses	119	61
10	Total expenses	$851	$465
11	Operating income	$169	$115

*Allocated on the basis of machine hours

What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)

Prepare the product mix analysis.

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