Fleet Valley Shoes produces two models: the Nx100 (a shoe aimed at competitive runners) and the Mx100

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Fleet Valley Shoes produces two models: the Nx100 (a shoe aimed at competitive runners) and the Mx100 (a shoe aimed at fitness buffs). Sales and costs for the most recent year are indicated:

Nx100 Mx100 Sales (pairs) 20,000 80,000 Sales $3,000,000 (700,000) $8,800,000 (1,200,000) Variable costs Contribution ma

Required
a. Suppose the company has 200,000 assembly hours available. Further, management believes that at least 4,000 pairs of each model must be produced so that the company has a presence in both market segments. How many pairs of each model should be produced in the coming year?
b. Suppose management decides that at least 6,000 pairs of each model must be produced. What is the opportunity cost of this decision versus requiring only 4,000 pairs?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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