Limited Resources
Portable Enterprises produces two lines of mobile homes: double-wide and single wide. Unit cost and revenue data pertaining to each product are shown below.
Double wide Single wide
Selling price... $70,000 $40,000
Total variable cost... $45,000 $20,000
Each double wide home requires 350 different labor hours and 125 machine hours. Each single wide home requires 175 direct labor hours and 150 machine hours. Demand for each line of homes far exceeds the company's total production capacity.
a. If Portable's production capacity is constrained by limited direct labor hours, which line of hyomes should it produce?
b. If Portable's total production capacity is constrained by machine hours, which line of homes should it produce?
