Question - Centric Sail Makers manufactures sails for sailboats. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 30,000 sails per year. The following information relates to current production:
|
|
Bedford Lamp
|
Lowell Lamp
|
|
Sales price
|
$25
|
$35
|
|
Variable costs
|
$17
|
$23
|
|
Machine hours required for one lamp
|
2
|
4
|
Total fixed costs are $50,000. Machine hour capacity is 25,000 hours per year. Assuming that the company can sell as many products as it can make, which product mix would deliver the highest operating income?
(a) 6,250 Bedford Lamps and 12,500 Lowell Lamps
(b) 0 Bedford Lamps and 6,250 Lowell Lamps
(c) 12,500 Bedford Lamps and 0 Lowell Lamps
(d) 12,500 Bedford Lamps and 12,500 Lowell Lamps