Three of Company X’s product lines are water timer clocks, roll and run clocks, and twist top clocks. The following information has been provided by the firm which manufactures these clocks for Company X. This information assumes that these three product lines are manufactured on the same production line.

Water timer clocks Roll and run clocks Twist top clocks

Monthly Demand 400 Units 150 Units 900 Units

Selling Price $10.00 $15.00 $10.00

Direct Materials $2.00 $3.00 $1.50

Direct Labour $1.50 $2.00 $1.25

Variable Overhead $0.38 $0.50 $0.31

Fixed Overhead $0.75 $1.00 $0.63

Machine hours required per Unit 0.3 0.5 0.25

Required:

  1. Assuming there are infinite machine hours, which product line should be the focus of the manufacturing efforts? Why? (3 Marks)
  2. Assuming that production was constrained by machine hours, which product line should be the focus of the manufacturing efforts? Why? (3 Marks)
  3. Assume that each month 375 machine hours are available. How many of each product line should be produced? (4 Marks)

Ensure that your answers for the above are discussed and supported by relevant calculations/workings.