Q8Bikes produces two types of bicycles: Deluxe (D) and Super Deluxe (SD). Demand for the products is high for both lines. The company uses the same machinery to produce both lines. The machinery can be run for a maximum of 5000 hours per period. Q8Bikes can produce 15 D bikes per hour or 10 SD bikes per hour. Fixed costs are 55,000 KWD per period. Sales prices and variable costs are as follow: Sales price per unit Variable cost per unit Deluxe KWD 190.000 65.000 Super Deluxe KWD 250.000 86.000 Requirements 1. Which product should Q8Bikes emphasize? Why? 2. To maximize profits, how many bikes of each line should Q8Bikes produce? Answer for each alternatives a, b, and c. Alternatives are independent. a. If for every D bike sold an SD bike is to be sold. b. If the maximum SD bikes that could be sold per period is 45,000. c. For maintenance purposes, only 95% of the available capacity can be used and for every SD bike sold 2 D bikes can be sold. 3. Given your answers in (2) what will the company's operating income be for each alternative?

Q8Bikes produces two types of bicycles: Deluxe (D) and Super Deluxe (SD). Demand for the products is high for both lines. The company uses the same machinery to produce both lines. The machinery can be run for a maximum of 5000 hours per period. Q8Bikes can produce 15 D bikes per hour or 10 SD bikes per hour. Fixed costs are 55,000 KWD per period. Sales prices and variable costs are as follow: Sales price per unit Variable cost per unit Deluxe KWD 190.000 65.000 Super Deluxe KWD 250.000 86.000 Requirements 1. Which product should Q8Bikes emphasize? Why? 2. To maximize profits, how many bikes of each line should Q8Bikes produce? Answer for each alternatives a, b, and c. Alternatives are independent. a. If for every D bike sold an SD bike is to be sold. b. If the maximum SD bikes that could be sold per period is 45,000. c. For maintenance purposes, only 95% of the available capacity can be used and for every SD bike sold 2 D bikes can be sold. 3. Given your answers in (2) what will the company's operating income be for each alternative?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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