The Hawley Lighting Company manufactures four types of lamps at its factory including table lamps, floor lamps, ceiling lamps, and
The Hawley Lighting Company manufactures four types of lamps at its factory including table lamps, floor lamps, ceiling lamps, and pendant lamps. Table 1 presents the average material costs for each of the products. Each product is made in one of two production processes by purchasing components, assembling and testing the product, and finally packaging it for shipping. Table lamps and floor lamps go through the assembly and finishing process in Department 1, while ceiling fixtures and pendant lamps go through the process in Department 2. Variable production costs and capacities are shown in Table 2. The capacities are measured in units of product. Note that there are regular and overtime possibilities for each department.
Average selling prices for the four products are known, and estimates have been made of the market demand for each product at these prices (see Table 3). Sales levels can also be affected by advertising expenditures. Starting with the demand levels in the table, an increase of up to $10,000 in advertising raises the demand by the percentage shown in the last row. An expenditure of less than $10,000 in advertising will lead to a proportional effect on demand. For example, an increase in advertising of $5,000 for table lamps would raise demand by 6 percent, or 3,600 units. However, there is a budget limit of $18,000 on the total amount to be spent on advertising among all four products.
- Calculate Unit Profit for each product (in cells B8:I8) and Total Profit (in cell B19).
- Calculate total capacity required in Department 1 (overtime) in cell B24 and Department 2 (regular and overtime) in cells B25:B26.
- Calculate total units produced of each product family in cells B28:B31.