Tread Mile produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Tread Mile could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows:

Requirements
1. What is the constraint?
2. Which model should Tread Mile produce?
3. If Tread Mile should produce both models, compute the mix that will maximize operating income.

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Per Unit Deluxe Regular Sales Price $1,040 570 Costs: Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Operating Expenses 300 78 276 120 115 889 $ 151 90 190 92 40 67 479 $ 91 Total Costs Operating Income allocated on the basis of machine hours