TreadMile

Price: $2.50


TreadMile produces two types of exercise treadmills: regular and deluxe. The exercise
craze is such that Lifemaster could use all its available machine hours to produce either
model. The two models are processed through the same production departments.
Data for both models is as follows:

			Deluxe	Regular
Sale price			980	560
Costs:
Direct materials			300	90
Direct labor			80	180
Variable manufacturing overhead			252	84
Fixed manufacturing overhead			108	36
Variable operating expenses			113	69
Total cost			853	459
Operating income			127	101

Requirements
1. What is the constraint?
2. Which model should TreadMile produce? Prepare the Product mix analysis. (Hint: TreadMile can product either 1 deluxe treadmill or 3 regular treadmills per machine hour.
3. If TreadMile should produce both models, compute the mix that will maximize
operating income.