Reference no: EM132098382

Layton Machining Company (LMC) manufactures two versions of a basic machine tool. One version is a standard model and one is a custom model, which requires some additional work and slightly higher-grade materials. The manufacturing process at LMC requires that each product go through two departments, Grinding and Finishing. The process in each department uses a single type of machine. Total machine capacity in Grinding is 86,000 hours, and in Finishing, total machine capacity is 66,500 hours. (Each department has multiple machines.) Total market demand is limited to 172,000 standard units and 192,000 custom units monthly. LMC is currently producing 162,000 standard units and 125,000 custom units each month. Cost and machine-usage data for the two products follow: Standard Custom Total Price $ 9.30 $ 11.30 Less variable costs per unit Material 2.50 3.00 Labor 2.20 2.45 Overhead 2.70 3.45 Contribution margin per unit $ 1.90 $ 2.40 Fixed costs Manufacturing $ 95,000 Marketing and administrative 56,000 $ 151,000 Grinding machine hours per unit 0.2 0.3 Finishing machine hours per unit 0.1 0.4 Grinding machine hours used 69,900 Grinding machine hours available 86,000 Finishing machine hours used 66,200 Finishing machine hours available 66,500 Quantity produced 162,000 125,000 Maximum demand 172,000 192,000 Profit $ 456,800 Required: a. What is the optimal production schedule for LMC? In other words, how many standard units and custom units should the company produce each month to maximize monthly profit? b. If LMC produces at the level found in requirement (a), how much will monthly profit increase over the current production schedule?