Gulf Breeze Corporation produces three products for water skiing enthusiasts: life vests, tow ropes, and water skis. Information relating to each product line is as follows:

Gulf Breeze pays its direct labor workers an average of $10 per hour. At full capacity, 65,000 direct labor hours are available per year. The marketing department has just released the following sales estimates for the upcoming year: life vests (25,000 units), tow ropes (15,000 units), and water skis (5,000 units). Based on these figures, demand for the current year is expected to exceed the company’s direct labor capacity.
a. What products should Gulf Breeze produce to maximize its operating income?
b. The company’s marketing manager believes that the production of the least profitable product is needed to “support” the demand for the most profitable products. How may this influence management’s decision regarding the company’s production schedule?

  • CreatedApril 17, 2014
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