Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners

P6-3A Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Manning is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows.

Product
Economy Standard Deluxe
Selling price $30 $50 $100
Variable costs and expenses $12 $18 $42
Machine hours required .5 .8 1.6

Instructions
(a) Ignoring the machine time constraint, which single product should Manning Industries produce?
(b) What is the contribution margin per unit of limited resource for each product?
(c) If additional machine time could be obtained, how should the additional time be used?

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Susan Hiel wanted to open up a hat shop

Susan Hiel wanted to open up a hat shop. She needs to know how many hats must be sold in a year to break even. The stores fixed costs for the year are estimated at $85,000. She is planning on selling the hats for $20.00 a piece. Her cost per hat is $10.50.

a) Find the operating breakeven point in number of hats
b) What is the total operating costs at the breakeven volume found in a.
c) A marketing firm is estimating that she will be able to sell an average of 1,000 hats per month. Should Susan start the business?
d) What will be the EBIT per month if Susan sells 1,000 hats?


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