Madison Cycles manually manufactures three unique bicycle models: racing, touring, and basic. All of the skilled craftspeople
Question:
Madison Cycles manually manufactures three unique bicycle models: racing, touring, and basic. All of the skilled craftspeople employed at Madison Cycles can make each of the three models. Because it takes about a year to train each craftsperson, labor is a fixed production constraint over the short term. For the year, the company expects to have available 40,000 labor hours. The average hourly labor rate is \(\$ 35\). Fixed costs are \(\$ 360,000\) for factory costs and \(\$ 90,000\) for selling and administrative costs. Data regarding the current product line follow.
a. If a maximum of 1,200 items of any product is determined can be sold, how many of each product should the company make?
b. What pre-tax income will the company earn given your answer to part \(a\) ?
Step by Step Answer:
Cost Accounting Foundations And Evolutions
ISBN: 9781618533531
10th Edition
Authors: Amie Dragoo, Michael Kinney, Cecily Raiborn