Question

Rodeo Printers operates a printing press with a monthly capacity of 4,000 machine-hours. Rodeo has two main customers: Trent Corporation and Julie Corporation. Data on each customer for January are:


Julie Corporation indicates that it wants Rodeo to do an additional $ 140,000 worth of printing jobs during February. These jobs are identical to the existing business Rodeo did for Julie in January in terms of variable costs and machine-hours required. Rodeo anticipates that the business from Trent Corporation in February will be the same as that in January. Rodeo can choose to accept as much of the Trent and Julie business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January.
What action should Rodeo take to maximize its operating income? Show your calculations. What other factors should Rodeo consider before making adecision?


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  • CreatedMay 14, 2014
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