Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each product requires time on a single machine. The machine has a monthly capacity of 576 hours. Total market demand for the two products is limited to 2,060 units of TI-12 and 1,030 units of TI-28 monthly. Talbot is currently producing and selling 1,530 TI-12 models and 786 TI-28 models each month. Cost and machine-usage data for the two products are shown in the following spreadsheet, which analysts at Talbot use for production planning purposes:
TI-12TI-28Total
Price$86$308
Less variable costs per unit
Material2693
Labor3267
Overhead829
Contribution margin per unit$20$119
Fixed costs
Manufacturing$34,300
Marketing and administrative$31,300
$65,600
Machine hours per unit$0$1
Machine hours used$546
Machine hours available$576
Quantity produced$1,530$786
Maximum demand$2,060$1,030
Profit$58,534
Required:
a. What is the optimal production schedule for Talbot Industries? In other words, how many TI-12s and TI-28s should the company produce each month to maximize monthly profit?
b. If Talbot Industries produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?
Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each product requires time on a single machine. The machine has a monthly capacity of 576 hours. Total market demand for the two products is limited to 2,060 units of TI-12 and 1,030 units of TI-28 monthly. Talbot is currently producing and selling 1,530 TI-12 models and 786 TI-28 models each month. Cost and machine-usage data for the two products are shown in the following spreadsheet, which analysts at Talbot use for production planning purposes: TI-12TI-28TotalPrice$86$308 Less variable costs per unit Material2693 Labor3267 Overhead829 Contribution margin per unit$20$119 Fixed costs Manufacturing $34,300Marketing and administrative $31,300 $65,600Machine hours per unit$0$1 Machine hours used $546Machine hours available $576Quantity produced$1,530$786 Maximum demand$2,060$1,030 Profit $58,534 Required: a. What is the optimal production schedule for Talbot Industries? In other words, how many TI-12s and TI-28s should the company produce each month to maximize monthly profit? b. If Talbot Industries produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?
