Layton Machining Company (LMC) manufactures two versions of a basic machine tool. One version is a...

Layton Machining Company (LMC) manufactures two versions of a basic machine tool. One version is a standard model and one is a custom model, which requires some additional work and slightly higher-grade materials. The manufacturing process at LMC requires that each product go through two departments, Grinding and Finishing. The process in each department uses a single type of machine. Total machine capacity in Grinding is 51,000 hours, and in Finishing, total machine capacity is 31,000 hours. (Each department has multiple machines.) Total market demand is limited to 102,000 standard units and 122,000 custom units monthly. LMC is currently producing 92,000 standard units and 53,000 custom units each month. Cost and machine-usage data for the two products follow:

	Standard		Custom		Total
Price	$	6.70	$	8.70
Less variable costs per unit
Material		1.55		2.05
Labor		1.30		1.55
Overhead		1.80		2.55
Contribution margin per unit	$	2.05	$	2.55
Fixed costs
Manufacturing					$	77,000
Marketing and administrative						38,000
					$	115,000
Grinding machine hours per unit		0.2		0.3
Finishing machine hours per unit		0.1		0.4
Grinding machine hours used						34,300
Grinding machine hours available						51,000
Finishing machine hours used						30,400
Finishing machine hours available						31,000
Quantity produced		92,000		53,000
Maximum demand		102,000		122,000
Profit	$	208,750

a. What is the optimal production schedule for LMC? In other words, how many standard units and custom units should the company produce each month to maximize monthly profit?

Standard Units ____

Custom Units ____

b. If LMC produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?

Increase profits by ____

Solutions

Expert Solution

ekkarill92 answered 8 months ago

Next > < Previous

Related Solutions

Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic...

Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the year, the following data were prepared for this plant: Basic Model Deluxe Model Expected quantity 40,000 20,000 Selling price $180 $360 Prime costs $80 $160 Machine hours 5,000 5,000 Direct labor hours 10,000 10,000 Engineering support (hours)...

DiDonato Supplies manufactures two versions of presentation remotes: Basic and Laser. Both models go through the...

DiDonato Supplies manufactures two versions of presentation remotes: Basic and Laser. Both models go through the same assembly process and are produced in the same plant. The difference between the models is in the additional parts for the laser model as well as the cost of the parts themselves. The following data are available for the year just ended: Basic Laser Total Number of units 290,000 80,000 370,000 Parts cost per unit $12 $25 Other costs: Direct labor $ 832,000...

A 12-month email study looked at the click-through responses triggered by two versions of email, Version A and Version B.

The situation… • A 12-month email study looked at the click-through responses triggered by two versions of email, Version A and Version B. • In all 24 distributions (12 for Version A; 12, Version B) emails were drawn randomly. • People receiving A or B versions were unrelated (randomly selected every time for both version of the email). • The researchers had no idea which version would trigger more clicks. • Alpha was set at p

Deriving cash flows for asset disposition. Custom Machining Company (CMC) purchased a made-to-order machine tool for...

Deriving cash flows for asset disposition. Custom Machining Company (CMC) purchased a made-to-order machine tool for grinding machine parts. The machine costs $160,000, and CMC installed it yesterday. Today, a vendor offers a machine tool that will do exactly the same work but costs only $80,000. Assume that the cost of capital is 12 percent, that both machines will last five years, that CMC will depreciate both machines on a straight-line basis for tax purposes with no salvage value, that...

Depreciation by Three Methods; Partial Years Layton Company purchased tool sharpening equipment on October 1 for...

Depreciation by Three Methods; Partial Years Layton Company purchased tool sharpening equipment on October 1 for $65,070. The equipment was expected to have a useful life of three years or 7,020 operating hours, and a residual value of $1,890. The equipment was used for 1,300 hours during Year 1, 2,500 hours in Year 2, 2,100 hours in Year 3, and 1,120 hours in Year 4. Required: Determine the amount of depreciation expense for the years ended December 31, Year 1,...

A company that manufactures and sells consumer video cameras sells two versions of their popular hard...

A company that manufactures and sells consumer video cameras sells two versions of their popular hard disk camera, a basic camera for $500, and a deluxe version for $1200. About 55% of customers select the basic camera. Of those, 30% purchase the extended warranty for an additional $100. Of the people who buy the deluxe version, 50% purchase the extended warranty. Complete parts a through d below. a) Sketch the probability tree for total purchases. Warranty 0.3 Basic and Warranty...

St. Louis Machining Company is engaged in the production of machine parts. One division specializes in...

St. Louis Machining Company is engaged in the production of machine parts. One division specializes in the production of two machine parts: Part #123 and Part #456. Historically, the profitability of the division has been tied to Part #123. However, in the past two years, the division has been facing intense competition and the sales of this part have declined. The following conversation between Betty DeRose, division manager, and Sandy Beach, marketing manager, reflects the concerns of the division's top...

(a) Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic...

(a) Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $84,600 of total inspecting costs this year. How much of...

Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering,...

Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Basic Advanced Total Units produced 110,000 330,000 — Prime costs $8,800,000 $34,980,000 $43,780,000 Machine hours 110,000 550,000 660,000 Engineering hours 500 4,500 5,000 Receiving orders 400 1,200 1,600 Inspection hours 700 1,400...

Noland Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model...

Noland Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10000 direct labor hours and the Luxury requires 30000 direct labor hours. The company produces 3400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $1316000 of total inspecting costs this year. How much of the...

Subjects