Rice Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp
The following per unit data are available:
Bedford Lamp Lowell Lamp
Sales price $26 $36
Variable costs $14 $26
Machine hours required for one lamp 4 5
Total fixed costs are $50,000. Machine hour capacity is 25,000 hours per year. Assuming that the company can sell as many products as it can make, which product mix would deliver the highest operating income?
A) 5,000 Bedford Lamps and 6,250 Lowell Lamps
B) 0 Bedford Lamps and 5,000 Lowell Lamps
C) 6,250 Bedford Lamps and 0 Lowell Lamps
D) 6,250 Bedford Lamps and 6,250 Lowell Lamps
C .C)
Bedford Lowell
Sales price $26 $36
Variable costs 14 26
Contribution margin $12 $10
Machine hour per unit 4 5
Contribution margin per machine hour $3 $2
Ranking 1 2
Hours available No. of units
Total 25,000
Bedford 25,000 6,250
Lowell 0 0
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