Tread Light produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Tread Light could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models are as follows:

*allocated on the basis of machine hours
Requirements
1. What is the constraint?
2. Which model should Tread Light produce? (Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)
3. If Tread Light should produce both models, compute the mix that will maximize operating income?

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Per Unit Deluxe Regular Sales price $ 1,030 $ 610 Costs: Direct materials 320 130 Direct labor 88 180 Variable manufacturing overhead 270 90 Fixed manufacturing overhead* Variable operating expenses 102 34 121 63 Total costs 901 497 Operating income 129 $ 113