Reference no: EM132869065
Question - Mac & Nac manufactures two types of women's handbags: a handbag that can be worn cross- body (model A), and an over-the-shoulder handbag (model B). Cost and revenue data for each model is shown below:
Model A: Selling price per unit- $80 Variable cost per unit- $56
Model B: Selling price per unit- $100 Variable cost per unit- $50
The plant that makes these handbags is operating at capacity. The company is currently using all of the available sewing machine hours which is 10,000 hours per month. Model B requires 2 hours of sewing machine time (there's more pockets and zippers on this model) while Model A requires 0.8 hours of sewing machine time.
Demand is 4,000 and 4,500 units for Model A and Model B respectively.
Required -
a. Which model should the company focus on given the constraint with machine hours? Use calculations to support your answer.
b. The company has determined that a minimum of 2,500 units should be made of each model. Calculate the total number of units of each model to produce.
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