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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.
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