Pierson Products manufactures furniture, primarily for institutional use, such as for furniture rental companies, college dorm rooms, and budget hotel and motel chains. The company’s Verne Valley plant manufactures one of the desk products. The desk comes in two models. The Basic desk is essentially a small table with a center drawer. The Professional desk has a keyboard tray and drawers on the side. 

The production process at Pierson Products starts in the Cutting Department, where wood is cut and the desk is prepared for assembly (holes drilled, and so on). From the Cutting Department, the desk goes to the Assembly Department, where it is painted, inspected, and packaged for shipment. The process in each department uses a single machine. There are 30,000 machine-minutes available in the Cutting Department in a month and 40,000 machine-minutes in the Assembly Department each month. The monthly demand is limited to 6,000 Basic desks and 4,000 Professional desks. The current production plan is to manufacture 4,000 of each desk model monthly. Cost and machine-usage data for the two products follow: 

Required

a. What is the optimal production schedule for Pierson Products? In other words, how many Basic desks and how many Professional desks should the company produce monthly to maximize profit?

b. If Pierson Products produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?

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1 2 Price 3 Less variable costs per unit 4 5 6 Material Labor Overhead 7 Contribution margin per unit 8 9 Monthly fixed costs 10 Manufacturing 11 12 14 Cutting machine minutes per unit 15 Assembly machine minutes per unit 16 Cutting machine minutes used 17 Cutting machine minutes available 18 Assembly machine minutes used 19 Assembly machine minutes available LU 21 Quantity produced 22 Maximum demand 23 Profit 24 Marketing and administrative Total monthly fixed costs B $ $ с Basic 70.00 28.00 15.00 9.00 18.00 2.4 1.5 4,000 6,000 DE F Professional $ 120.00 $ 54.00 20.00 12.00 34.00 5.0 2.5 4,000 4,000 G H Total $208,000 $53,000 39,000 $92,000 29,600 30,000 16,000 40,000 $116,000