What is the optimal production level in number of square yards for each product (deluxe wood floors)?
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This question is from my Management Accounting book:
Company A makes a regular and a deluxe grade of wood floors. Regular Grade is sold at $16 per square yard and the deluxe grade is sold at $25 per square yard. The flexible cost of making the regular grade is $10 per square yard. It costs an extra $5 per square yard to make the deluxe grade. It takes 15 labor hours to make 100 square yards of the regular grade and 20 labor hours to make 100 square yards of the deluxe grade. There are 4,600 hours of labor time available for production each week. The maximum weekly sales for the regular and the deluxe model are 30,000 and 8,000 respectively. Capacity-related production costs total $600,000 per year. All selling costs are capacity-related. What is the optimal production level in number of square yards for each product.
I have attached the spreadsheet I have been working on, but I am stuck!
I don't know what is the important information and what I am supposed to do with it!
** See ATTACHED file(s) for complete details **
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