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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 77,000 hours, and in Finishing, total machine capacity is 57,500 hours. (Each department has multiple machines.) Total market demand is limited to 154,000 standard units and 174,000 custom units monthly. LMC is currently producing 144,000 standard units and 106,000 custom units each month. Cost and machine-usage data for the two products follow:

	Standard			Custom			Total
Price	$	7.70		$	9.70
Less variable costs per unit
Material		2.00			2.50
Labor		1.75			2.00
Overhead		2.25			3.00
Contribution margin per unit	$	1.70		$	2.20
Fixed costs
Manufacturing							$	86,000
Marketing and administrative								47,000
							$	133,000
Grinding machine hours per unit		0.2			0.3
Finishing machine hours per unit		0.1			0.4
Grinding machine hours used								60,600
Grinding machine hours available								77,000
Finishing machine hours used								56,800
Finishing machine hours available								57,500
Quantity produced		144,000			106,000
Maximum demand		154,000			174,000
Profit	$	345,000

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?

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