Question:

Office Supply Company(OSC) manufactures 2 products, a desk tray and a pen box. Both products are produced on two equal machines each of which can operate 80 hours per week. One has broken down and will take weeks to repair. Data relating to these products is as given:

Desk

Tray       Pen

Box

Selling Price        10.00     6.00

Expected weekly sales (units)    4,000     9,000

Total Variable Costs per unit       6.00        4.00

Total Fixed Costs per unit (based on expected production)          1.00        .75

Direct Labor Hours required to produce one unit               .10          .25

Number of units that can be made per Machine Hour     50           150

a) When both machines are working how many of each unit should OSC produce?

-under regular circumstances produce desk trays first as they have the largest CM/unit

Note - total MH's available are 2 machines * 80 hrs = 160 MH's

b) What could be the expected Operating Income per week?

c) With only one machine working many of each unit could OSC produce?

-in this case OSC could produce pen boxes first to maximize profits.

d) What could be the expected operating income per week?