North York Statue Company makes miniature Mountie statues from cast iron. Sales total 40,000 units a year. The statues are finished either rough or polished, with an average demand of 60 percent rough and 40 percent polished. Iron ingots, the direct material, costs $6 per kilogram. Processing costs are $200 to convert 20 kilograms into 40 statues. Rough statues are sold for $15 each and polished statues can be sold for $18 or engraved for an additional cost of $5. Polished statues can then be sold for $30.
Required:
Determine the product mix for statues that allows maximization of the company's operating margin.

Question

Quizplus · Accepted Answer

The Answer of North York Statue Company makes miniature Mountie statues from cast iron. Sales total 40,000 units a year. The statues are finished either rough or polished, with an average demand of 60 percent rough and 40 percent polished. Iron ingots, the direct material, costs $6 per kilogram. Processing costs are $200 to convert 20 kilograms into 40 statues. Rough statues are sold for $15 each and polished statues can be sold for $18 or engraved for an additional cost of $5. Polished statues can then be sold for $30.
Required:
Determine the product mix for statues that allows maximization of the company's operating margin.

North York Statue Company Makes Miniature Mountie Statues from Cast