Calculate allocation of resources and hence production mix

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Reference no: EM13920520

An organisation manufactures plastic-covered steel fencing in two qualities: standard and heavy gauge. Both products pass through the same processes involving steel forming and plastic bonding.

The standard gauge sells at $15 a roll and the heavy gauge at $20 a roll. There is an unlimited market for the standard gauge but outlets for the heavy gauge are limited to 13,000 rolls a year. The factory operations of each process are limited to 2,400 hours a year. Other relevant data is given below.

Variable costs per roll

	Direct material	Direct wages	Direct expense
Standard	$ 5	$ 7	$ 1
Heavy	7	8	2
Processing hours per 100 rolls		Steel	Plastic
Standard		forming Hours 6	bondingHours 4
Heavy		8	12
Required

Calculate the allocation of resources and hence the production mix which will maximise total contribution.

Reference no: EM13920520

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