Sullivan Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. Ad is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.). Read the requirements Requirement 1. What balances.) Begin by calculating the Less Hours of constr Net relevant benefit Sullivan should use its Requirements 1. What product mix-that is, how many units of A6 and EX4-will maximize Sulivan's operating income? Show your calculations. 2. Suppose Sullivan can increase the annual capacity of its regular machines by 10,000 machine-hours at a cost of $80,000. Should Sullivan increase the capacity of the regular machines by 10,000 machine hours? By how much will Sullivan's operating income increase or decrease? Show your calculations. 3. Suppose that the capacity of the regular machines has been increased to 60,000 hours. Sullivan has been approached by Delaney Corporation to supply 26,000 units of another cutting tool, V2, for $120 per unit. Sullivan must either accept the order for all 26,000 units or reject it totaly. V2 is exactly like A6 except that its variable manufacturing cost is $50 per unit. (It takes 1 hour to produce one unit of V2 on the regular machine, and variable marketing cost equals $10 per unit) What product mix should Sullivan choose to maximize operating income? Show your calculations. X our calculations. (Enter an amount in each input cell including zero ing EX4 rather than A6 is to cover the additional costs Sullivan Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: AB, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to the information Read the red Data table A6 EX4 Requiremen balances.) Begin by cald Selling price Variable manufacturing cost per unit ha. (Enter an amount in each input cell including zero $ 15 $ 180 $ 45 S 125 Variable marketing cost per unit $ 10 $ 30 Budgeted total fixed overhead costs $ 340,000 $ Hours required to produce one unit on the regular machine 1.0 610,000 0.5 x Hour Additional information includes the following Loss Net relevant Sulivan sho of leasing the Requiremen machines by Begin by cal a. Sullivan faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. 6. Of the $610,000 budgeted fixed overhead costs of EX4, $400,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Sullivan uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties d. All other overhead costs are fixed and cannot be changed. Print Done than A6 is to cover the additional costs. ould Sullivan increase the capacity of the regular cell including zero balances.) Requirement 1. What product mix- that is, how many units of A6 and EX4-will maximize Sullivan's operating income? Show your calculations. (Enter an amount in each input cell including zero- balances.) Begin by calculating the benefit from only selling A6 or EX4. Hours of constrained resource Less Net relevant benefit A6 EX4 Sullivan should use its capacity to produce of leasing the high-precision machine. since the net relevant benefit in The additional contribution from selling EX4 rather than A6 is to cover the additional costs Requirement 2. Suppose Sullivan can increase the annual capacity of its regular machines by 10,000 machine-hours at a cost of $80,000. Should Sullivan increase the capacity of the regular machines by 10,000 machine hours? By how much will Sullivan's operating income increase or decrease? Show your calculations. Begin by calculating the benefit from only sating A6 or EX4 with the increased capacity of the regular machine. (Enter an amount in each input cell including zero balances.) AB EX4 Less Hours of constrained resource Cost of increasing capacity Net relevant benefit Should Sullivan increase the capacity of the regular machines by 10,000 machine hours? By how much will Sullivan's operating income increase? Sullivan income will increase by increase the capacity of the regular machine by 10,000 machine hours. Sullivan's operating Requirement 3. Suppose that the capacity of the regular machines has been increased to 60,000 hours. Sullivan has been approached by Delaney Corporation to supply 26,000 units of another cutting tool, V2, for $120 per unit. Sullivan must either accept the order for all 26,000 units or reject it totally. V2 is exactly like A6 except that its variable manufacturing cost is $50 per unit. (It take one hour to produce one unit of V2 on the regular machine, and variable marketing cost equals $10 per unit) What product mix should Sullivan choose to maximize operating income? Show your calculations. First, determine the amount that should be used to determine if Sullivan should accept Delaney's order. Sulivan accept Delaney's order. A6 EX4 V2 Next, determine the product mix for A6 and EX4 that will maximize operating income along with the decision you made about blaney's order. (Enter an amount in each input cell including zero balances) N Hours of constrained resource Loss Net relevant beneft A6 EX4 Next, determine the product mix for A6 and EX4 that will maximize operating income along with the decision you made about Delaney's order. (Enter an balances.) Hours of constrained resource A6 EX4 Less: Net relevant benefit What product mix should Sullivan choose to maximize operating income? (Enter an amount in each input cell, including zero balances.) Based on the above calculations, the product mix that maximizes operating income is units of A6, and units of EX4. units of V2