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Question:
Vinak Ltd., which produces three products provides you the following data for 2008-2009.
Products A B C Selling price per unit (£.) 100 75 50 Profit volume ratio (%) 10 20 40 Maximum sales potential (units) 40,000 25,000 10,000 Raw material content as percentage of variable costs (%) 50 50 50
The fixed expenses are estimated at £ 680,000. The company uses a single raw material in all the three products. Raw material is in short supply and the company has a quota for the supply of raw materials of the value of £ 1,800,000 for the year 2008-2009 for the manufacture of its products to meet its sales demand.
Required:
i) set a product mix which will give a maximum overall profit keeping the short supply of raw materials in view.
(ii) compute the maximum profit.
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