Oceana Corporation manufactures and sells three products, which are manufactured in a factory with four departments. Both labor and machine time are applied to the products as they pass through each department. The machines and labor skills required in each department are so specialized that neither machines nor labor can be switched from one department to another.
Inventory levels are satisfactory and need not be increased or decreased during the next six months. Unit price and cost data that will be valid for the next six months are as follows:

Oceana Corporation€™s management is planning its production schedule for the next few months. The planning is complicated, because there are labor shortages in the community and some machines will be down several months for repairs.
The sales department believes that the monthly demand for the next six months will be as follows:
Product Monthly Unit Sales
M50............................................................................... 500
T79................................................................................ 400
B81............................................................................... 1,000
Management has assembled the following information regarding available machine and labor time by department and the machine hours and direct-labor hours required per unit of product. These data should be valid for the next six months.

Required:
1. Calculate the monthly requirement for machine hours and direct-labor hours for the production of products M50, T79, and B81 to determine whether the monthly sales demand for the three products can be met by the factory.
2. What monthly production schedule should Oceana€™s management select in order to maximize its dollar profits? Explain how you selected this production schedule, and present a schedule of the contribution to profit that would be generated by your production schedule.
3. Identify the alternatives management might consider so it can supply its customers with all the product they demand.
(CMA,adapted)

Transcribed Image Text:

Product B81 M50 Unit costs 28 S 52 Direct material Direct labor: 48 Department 1 Department3 Department 4 ariable overhead $ 72 100 128 108 Flxed overhead Variable selling expenses 784 492 Unit selling price Department Monthly Capacity Availablity Normal machine capacity in machine hours Capacity of machines being repaired In machine hours(500) Available machine capacity in machine hours Available labor In direct-labor hours 3,500 (400) 3,100 4,500 3,500 3,000 3,500 (300) 200) 2,700 3,300 2,750 2,600 3,000 3,700 Labor and Machine Specifications per Unit of Product Product Labor and Machine Time Direct-labor hours Machine hours Direct-labor hours Machine hours B8 1Direct-labor hours Machine hours