Because the contribution per manufactured pair of

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Unformatted text preview: contribution per available machine‐hour, which is the limiting resource, as shown below. Because snowboards have a higher contribution per machine‐hour than skates, OmniSport should manufacture the maximum number of snowboards. Because the contribution per manufactured pair of skates is higher than the contribution from a purchased pair of skates, total contribution will be maximized by using the remaining manufacturing capacity to produce skates and then purchasing the remaining required skates. This optimal combination is calculated as presented below. Manufactured Purchased Manufactured Snowboard Skates Skates Bindings 6,000 pairs 1,000 pairs 12,000 Per Per Per Unit Total Unit Total Unit Total Total $117.60 $705,600 $117.60 $117,600 $72.00 $864,000 $1,687,200 Selling price Variable costs Direct materials 90.00 540,000 9.60 9,600 24.00 288,000 837,600 Machine operating costs — — 14.40 14,400 7.60 91,200 105,600 1 — Manufacturing overhead costs — 28.80 28,800 2.40 28,800 57,600 Selling & administrative costs 4.802 28,800 18.00 18,000 9.603 115,200 162,000 Variable costs 94.80 568,800 70.80 70,800 43.60 523,200 1,...
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