Mickey Company manufactures three different sizes of stuffedteddy bears (large, small and medium d corresponding costs for themonth of January 2004 are given below
large
medium
small
projected sales (unit)
3000
5000
4000
$
$
$
price per unit
40
30
20
variable cost per unit
–direct material
12
10
8
–direct labour
8
5
3
— supply cost
5
3
2
fixed cost per unit
2
2
2
total unit cost
27
20
15
It takes 20, 15 and 10 machine hours to manufacture 100 units oflarge, medium and small teddy bears, respectively. The company hasa monthly machine hour capacity of 2,050 machine hours and thismachine hour capacity cannot be increased for at least a year.
required
b) Determine how many units Mickey Company should produce ofeach size to maximise its profits.
required
c) Suppose that a foreign firm has offered to buy 2,000 largeteddy bears at $45 each. Determine the opportunity costs for thisorder.
required
d) Suppose that the available machine hour capacity is reducedto 1,550 machine hours due to machine break down. How many units ofeach size should Mickey Company produce to maximise itsprofits?
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