Sum Toys (P) Ltd

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Sum Toys (P) Ltd. manufactures and sells children's toys of high quality over an extensive market, utilizing the services of skilled artisans who are paid at an average rate of 15 per hour. The total number of skilled labour hours available in a year is only 14,000. The details of planned production for 2009-10, estimated cost and unit selling prices are given below: Toy Production Cost of Production per Unit Selling Price Planned (Units) Direct Materials ) Direct Labour ) Fixed Overheads ) per unit) ? 3,000 20 10 B 4,000 24 12 18 92 ? 4,000 32 18 95 D 3,000 40 16 24 110 E 2,400 60 20 180 15 70 ???|?|?| ? 12 30 Variable overhead costs amount to 50% of the direct labour cost. The company has estimated the following maximum demand for each product. The company has minimum commitment for each product for its permanent customers. Demand ? B ? D E Maximum (units) 5,000 6,000 6,000 4,000 4,000 Minimum (units) 1,000 1,000 1,000 5001 500 (a) What is the estimated profit for 2009-10 as per the company's production plan? (b) Do you agree with the said plan? If not, what would be the plan for maximum profit? (c) What is the estimated profit as per the plan suggested by you in (b)?