Maximize net income, If Runner Corp. can only sell a

Maximize net income

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Reference no: EM13926197

Runner Corp. manufactures two models of a fishing reel: Deluxe and Supreme, selling for $90 and $150, respectively. There are only 26,000 hours of the master craftsmen's time available to manufacture reels. Direct labor and other variable costs come to $30 for the Deluxe model and $60 for the Supreme. Total fixed costs equal $70,000. It takes the craftsmen 2 hours to make the Deluxe model and 4 hours for the Supreme. Demand for these reels is such that it is estimated up to 6,000 of each type of reel can be sold.

Required:

If Runner Corp. can only sell a maximum of 6,000 units of each type of reel, how many of each reel should Runner Corp. make in order to maximize net income? Explain your answer fully and show your computations.

Reference no: EM13926197

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