Solution-Compute the product mix that would earn maximum

Compute the product mix that would earn maximum profit

Reference no: EM132354152

Question

Rich Plc is currently preparing its budget for the year ended 31st December 2017. The company manufactures and sells three products, "BIG", "SMALL" and "MEDIUM". The unit selling price and variable cost of each product is as follows.

Cost of Direct labour hour will be Rs. 6/= while cost of 1 Kg of material will be Rs.10. For the next year ending 31st December 2017, 850,000 direct labour hours and 500,000 kg of material will be available. The fixed cost will be Rs. 5 Mn for the year.

Estimated maximum demand for the products will be as follows.

BIG SMALL MEDIUM 24,000 12,000 60,000

a. You are required to compute the product mix that would earn maximum profit for the company.

b. Briefly explain other factors that should be considered in determining the optimum production mix under limiting factor decision situation.

BIG Rs.

SMALL Rs.

MEDIUM Rs. Selling Price 100 150 200 Variable Cost Labour 30 54 60 Material 20 50 80

Reference no: EM132354152

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Compute the product mix that would earn maximum profit

Reference no: EM132354152

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