Hot Space produces a line of radiant heaters and a radiant tube replacement kit. Demand for the radiant heaters is increasing and Gordon has requested for help in planning the best sales and production mix for next year. He has provided Maureen with some data that she has shared with you.

“I need to know how to plan for next year in terms of what to produce and sell. We run a single-shift operation with no possibility of changing that. Not even for emergency overtime. We have a capacity of 150,000 direct-labour hours per year and that is not going to change. Our people and machines are currently used to produce all five products when required,” Gordon told you as he sat you down in his office. “The direct-labour rate is $12.00 per hour and that will not change next year.” 

“All of our non-manufacturing costs are fixed. Fixed costs total $356,000 per year. Our variable manufacturing costs are $4.00 per direct-labour hour, or so I am told. Don’t worry about whatever inventory we have as it’s insignificant.” He said. 

“I need to know how many labour hours are required for me to meet my demand for next year. Do I have enough hours to produce everything I need? Additionally, I need to know what my production plan should be. Tell me which my most profitable product is. Show me a plan that will maximise my income.”

Calculate:

i. The number of labour hours required to fulfil his department’s requirements for next year; 

ii. The ranking of the most profitable product; and,

 iii. The appropriate production plan for next year that maximises income.

Transcribed Image Text:

Selling Price per unit Demand Direct Direct Product next year Materials Labour Heller Duo ... 26,000 $35.00 $3.50 $4.80 Radiant Duo .... 42,000 $24.00 $2.30 $3.00 Emitter Duo .. 40,000 $22.00 $4.50 $8.40 Intense Duo .... 46,000 $18.00 $3.10 $6.00 Tube replacement Kit ... 450,000 $14.00 $1.50 $2.40 Selling Price per unit Demand Direct Direct Product next year Materials Labour Heller Duo ... 26,000 $35.00 $3.50 $4.80 Radiant Duo .... 42,000 $24.00 $2.30 $3.00 Emitter Duo .. 40,000 $22.00 $4.50 $8.40 Intense Duo .... 46,000 $18.00 $3.10 $6.00 Tube replacement Kit ... 450,000 $14.00 $1.50 $2.40

Answer rating: 100% (QA)

1 Number of direct labor hours required per unit Number of direct labor hours required for one unit ... View the full answer