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Calculate the optimal product mix

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Reference no: EM133002349

Question - ABC Limited manufactures two products: Chip, Hhip and Skip. Information regarding the products is as follows:

 

CHIP

HHIP

SKIP

Revenue per unit

$600

$620

$720

Direct Material and Labour cost per unit

$240

$260

$340

Variable production overhead cost per unit

$160

$100

$140

Total Market Demand

15,000

12,000

9000

Machine hour per unit

0.5 DLH

0.25 DLH

0.75 DLH

There are 12,000 machine hours available during the quarter. Fixed costs are estimated at $6,240,000 per annum and are assumed to accrue evenly during the year.

Required -

a. Calculate the optimal product mix?

b. Calculate the optimal profit for the quarter.

c. Explain what is a limiting factor.

Reference no: EM133002349

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