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Grissom Products Installs Standard and Deluxe Storage Sheds Most of the Installation Process of the Sheds Is Done

Question 72

Essay

Grissom Products installs standard and deluxe storage sheds.Selected data related to each product is as follows:
StandardDeluxe Sales price per unit $2000$4000 Direct materials per unit 350600 Direct labour per unit 250350 Variable overhead per unit 100200 Direct labour hours per unit 46\begin{array}{lrr}&\underline{\text {Standard}}&\underline{\text {Deluxe}}\\\text { Sales price per unit } & \$ 2000 & \$ 4000 \\\text { Direct materials per unit } & 350 & 600 \\\text { Direct labour per unit } & 250 & 350 \\\text { Variable overhead per unit } & 100 & 200 \\\text { Direct labour hours per unit } & 4 & 6\end{array}
Most of the installation process of the sheds is done using direct labour.There are a maximum of 24 000 direct labour hours available each year.
Required:
A. If there is unlimited demand for both products, how many of each type of shed should be installed in order to maximise profits?

B. If the company believes that there is sufficient demand for up to 4000 standard and 2500 deluxe sheds each year, how many of each type should be installed in order to maximise profits?

Correct Answer:

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A. Grissom should maxumse the 1nstallati...

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