dolution

Optimum Product Mix Austin Enterprises makes and sells three types of dress shirts. Management is trying to determine the most profitable mix. Sales prices, demand, and use of manufacturing inputs follow:

The company faces two limits: (1) the volume of each type of shirt that it can sell (see maximum annual demand) and (2) 30,000 direct labour-hours per year caused by the plant layout.

Required 

Show supporting data in good form.

 a. How much operating profit could the company earn if it were able to satisfy the annual demand? 

b.   Which of the three product lines makes the most profitable use of the constrained resource, direct labour?

  c.   Given the information in the problem so far, what product mix do you recommend? 

d.   How much operating profit should your recommended product mix generate?

 e. Suppose that the company could expand its labour capacity by running an extra shift that could provide up to 10,000 more hours. The direct labour cost would increase from $16 to $19 per hour for all hours of direct labour used. What additional product(s) should Austin manufacture and what additional profit would be expected with the use of the added shift?