Gulf Breeze Corporation produces three products for water skiing enthusiasts: life vests, tow ropes, and...
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Gulf Breeze Corporation produces three products for water skiing enthusiasts: life vests, tow ropes, and water skis. Information relating to each product line is as follows.
Selling price: life vests $58... Tow ropes $25... water skis $175
Direct materials: life vests $12... tow ropes $3... water skis $75
Direct labor: life vests $20... tow ropes $10... water skis $80...
Variable overhead: life vests $6... tow ropes $2... water skis $4
Gulf Breeze pays its direct labor workers an average of $10 per hour. At full capacity, 65,000 direct labor hours are available per year. The marketing department has just released the following sales estimates for the upcoming year: life vests (25,000 units), tow ropes (15,000 units), and water skis (5,000 units). Based on these figures, demand for the current year is expected to exceed the company's direct labor capacity.
a-1. Calculate the total hours required to meet demand of each products.
a-2. What products should Gulf Breeze produce to maximize its operating income?
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