Reference no: EM132649626

A company produces two products, Alpha and Beta, details of which are as follows:

                                                                   Alpha                   Beta

Material X at R5 / kg                          10                         20

Labour at R2 / hour                             20                        10

Variable machine costs at R3 / hour         12                         9

Variable costs                                       6                          6

                                                         48                       45

Selling price                                          60                         60

Demand                                                1,000                  1,000

Material is restricted, owing to import restrictions, to 5 000kg monthly. The machine hour capacity of the company is 6 000 hours monthly. There are no opening or closing of stocks.

You are required to show, with reasons:

Question 1: The production plan the company should follow to maximise profits, and the contribution so arising.

Question 2: The minimum selling price the company could quote on a special order which required the under mentioned costs:

Material X R1 000

Labour R1 000

Machine time R150

Variable costs R400

Question 3:  If Alpha and Beta can be purchased at a price of R52 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits.