Portable Enterprises produces two lines of mobile homes: double-wide and single-wide. Unit cost and revenue data pertaining to each product are shown below:
Double Wide Single Wide
Selling price $70,000 $40,000
Total variable costs 45,000 20,000
Each double wide home requires 350 different labor hours and 125 machines hours. Each single wide home required 175 direct labor hours and 150 machine hours. Demand for each line of homes far exceed's the company's total production capacity.
a) If Portable's production capacity is constrained by limited direct labor hours, which line of homes should it produce?
b) If Portable's total production capacity is constrained by machine hours, which lines of homes should it produce?
The solution discusses Portable Enterprises Ltd. resources including how many of eat model should be produced.