Four of Under Armour's product lines include training shoes, running shoes, basketball shoes, and lifestyle shoes. The following discussion presents hypothetical information regarding the production of these shoes. This information assumes that these four product lines are manufactured on the same production line.
Product Lines:
- Training shoes
- Running shoes
- Basketball shoes
- Lifestyle shoes
Monthly Demand:
- Training shoes: 80,000
- Running shoes: 120,000
- Basketball shoes: 150,000
- Lifestyle shoes: 50,000
Selling Price:
- Training shoes: $145.00
- Running shoes: $150.00
- Basketball shoes: $180.00
- Lifestyle shoes: $135.00
Direct Materials:
- Training shoes: $32.00
- Running shoes: $30.00
- Basketball shoes: $40.00
- Lifestyle shoes: $28.00
Direct Labor:
- Training shoes: $20.00
- Running shoes: $22.00
- Basketball shoes: $30.00
- Lifestyle shoes: $15.00
Variable Overhead:
- Training shoes: $20.00
- Running shoes: $22.00
- Basketball shoes: $30.00
- Lifestyle shoes: $15.00
Fixed Overhead Machine hours:
- Training shoes: $2.00
- Running shoes: $4.00
- Basketball shoes: $5.00
- Lifestyle shoes: $2.00
Required:
1. Assuming there are infinite machine hours, which product line should be the focus of the manufacturing efforts? Why? (2 Marks)
2. Assuming that production was constrained by machine hours, which product line should be the focus of the manufacturing efforts? Why? (2 Marks)
3. Assume that each month 325,000 machine hours are available. How many of each product line should be produced? (3 Marks)
4. Assume that the firm was approached by a manufacturer offering to produce the firm's shoe lines on their behalf. Briefly discuss the financial and non-financial factors that would be relevant when evaluating this proposal (3 Marks).
Ensure that your answers for the above are discussed and supported by relevant calculations/workings.
NOTE: Machine hours are not provided for each shoe type. Please answer based on the information provided.