Section $3$ Streamline Products?

After spending a few weeks contemplating the next move for LSI, Jason has come up with two options. The first option is to streamline the performance baseball apparel department by eliminating the less profitable products. Jason knows that the profitability of each product is limited by the number of operating hours available to his production staff. By $$cutting the fat$$ LSI can focus on producing fewer products at a higher quality, which will lead to higher profitability. Jason has put together the numbers $($Appendix III$)$ from the performance baseball apparel production department. He would like you to create an optimal production schedule given the departmental constraints. He would also like you to determine the forecasted Operating Income Statement for each year until $2027.$ Ignore the impact of both taxes and the time value of money.

Appendix III: "Streamline Products $-$ Performance Baseball Apparel"

$2024$ Budget:

Socks:

Sales: $145,000$ units

Sales Price per unit: $$19\mathrm{.}99$

Direct Materials per unit: $$3\mathrm{.}78$

Direct Labour per unit: $$8\mathrm{.}91$

Variable Overhead per unit: $$3\mathrm{.}24$

Variable Sales per unit: $$3\mathrm{.}00$

Fixed Overhead per year: $$977,500$

Fixed Sales Expenses per year: $$125,000$

Production Minutes per unit: $1$

Production Hours per unit: $0\mathrm{.}017$

Shorts:

Sales: $85,000$ units

Sales Price per unit: $$49\mathrm{.}99$

Direct Materials per unit: $$23\mathrm{.}28$

Direct Labour per unit: $$11\mathrm{.}01$

Variable Overhead per unit: $$3\mathrm{.}24$

Variable Sales per unit: $$7\mathrm{.}50$

Fixed Overhead per year: $$1,437,500$

Fixed Sales Expenses per year: $$125,000$

Production Minutes per unit: $16$

Production Hours per unit: $0\mathrm{.}267$

Pants:

Sales: $45,000$ units

Sales Price per unit: $$74\mathrm{.}99$

Direct Materials per unit: $$37\mathrm{.}16$

Direct Labour per unit: $$22\mathrm{.}79$

Variable Overhead per unit: $$3\mathrm{.}24$

Variable Sales per unit: $$11\mathrm{.}25$

Fixed Overhead per year: $$1,150,000$

Fixed Sales Expenses per year: $$125,000$

Production Minutes per unit: $10$

Production Hours per unit: $0\mathrm{.}167$

T$-$shirts:

Sales: $50,000$ units

Sales Price per unit: $$27\mathrm{.}99$

Direct Materials per unit: $$4\mathrm{.}32$

Direct Labour per unit: $$1\mathrm{.}88$

Variable Overhead per unit: $$3\mathrm{.}24$

Variable Sales per unit: $$1\mathrm{.}20$

Fixed Overhead per year: $$725,000$

Fixed Sales Expenses per year: $$125,000$

Production Minutes per unit: $8$

Production Hours per unit: $0\mathrm{.}133$

Jackets:

Sales: $60,000$ units

Sales Price per unit: $$129\mathrm{.}99$

Direct Materials per unit: $$34\mathrm{.}04$

Direct Labour per unit: $$12\mathrm{.}78$

Variable Overhead per unit: $$3\mathrm{.}24$

Variable Sales per unit: $$19\mathrm{.}50$

Fixed Overhead per year: $$2,156,250$

Fixed Sales Expenses per year: $$375,000$

Production Minutes per unit: $30$

Production Hours per unit: $0\mathrm{.}500$

Total Production Hours Available: $61,200$