Ooo-La-La Company Has Met All Production Requirements for the Current

question 92

Essay

Ooo-La-La Company has met all production requirements for the current month and has an opportunity to manufacture additional units with its excess capacity. Unit selling prices and unit costs for three product lines follow.

Variable overhead is applied on the basis of direct labor dollars, whereas fixed overhead is applied on the basis of machine hours. There is sufficient demand for the additional manufacture of all products.
Required:
A. If Ooo-La-La has excess machine capacity and can add more labor as needed (i.e., neither machine capacity nor labor is a constraint), which product is the most attractive to produce?
B. If Ooo-La-La has excess machine capacity but a limited amount of labor time available, which product or products should be manufactured in the excess capacity?

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Definitions:

Win-lose

A competitive perspective where one party's gain is perceived to be at the expense of another's loss.

Third Party

An entity or individual that is not directly involved in a transaction or agreement but may be affected by it or have an interest in it.

Conflicts

Disagreements or disputes between individuals or groups, often arising from differing needs, values, or interests.

Moderate

Exhibiting average intensity or amount; neither extreme nor minimal.