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The senior management a CML Watercraft would like to determine if it is possible to improve the profitability by changing the existing product mix. Currently, the product mix is determined by giving resource priority to the highest contribution margin watercraft. CML Watercraft always has a contingent of 10 workers on hand; each worker is paid $25 per hour. Overhead costs are $35,000 per week. The plant operates 18 hours per day and 6 days per week. Labor is considered a fixed expense because the workers are paid for their time regardless of their utilization. The production manager has determined that workstation 1 is the bottleneck. Detailed production information is provided below.
Model
A
B
C
Price
$450
$400
$500
Material Cost
$50
$40
$110
Weekly Demand
100
75
40
Processing Time Station 1
60 min
0 min
30 min
Processing Time Station 2
Processing Time Station 3
10 min
Processing Time Station 4
20 min
40 min
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