Question - Limited resource decision
Trailblazers produces two types of hiking boots: the men's boot and the women's boot. The two types of boots are similar except that the women's boots are more stylish. Both types are made using the same machines. It takes 15 minutes of machine time to produce one pair of men's boots, whereas it takes 30 minutes of machine time to produce one pair of women's boots. The difference in production time results mainly from the different materials used in construction. The relevant data concerning the two types are as follows:
|
|
Men's
|
Women's
|
|
Sales price (per pair)
|
$35
|
$40
|
|
Less: Direct materials
|
10
|
13
|
|
Direct variable
|
4
|
4
|
|
Variable overhead
|
8
|
10
|
|
Contribution margin
|
$13
|
$13
|
|
Required machine time
|
¼ hour
|
½ hour
|
Required -
a. If the amount of machine time available to Trailblazers is limited, which boot should be produced first?
b. If the total machine time available is 640 hours per month and the demand for each type of boot is 1000 pairs per month, how many of each type should be produced to maximise profit?
c. What other factors should be considered in this decision, and how would they impact the decision?