TreadMile produces two types of exercise treadmills: Regular and Deluxe. The exercise craze is such that TreadMile could use all of its available machine hours producing either model. The two models are processed through the same production department.
______________________________________________________________Per Unit
___________________________________________________________Deluxe Regular
Sale price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $990...........$550
Costs:
Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$300...........$100
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82............182
Variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252............84
Fixed manufacturing overhead * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126............42
Variable operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115.............67
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $875..........$475
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$115...........$ 75
* Allocated on the basis of machine hours.
What product mix will maximize operating income?