question archive Brian Ltd produces three products which have the following unit contributions and labour requirements
Brian Ltd produces three products which have the following unit contributions and labour requirements
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Brian Ltd produces three products which have the following unit contributions and labour requirements. Product Unit contribution Labour requirement ? Hours Scratch 6 2. Purr 7 3 Buzz 8 3 Due to industrial action only 2,600 labour hours are available in control period 13, when expected demand is 700 units of each product. Fixed costs are K1,700 for the period. What is the profit-maximising product mix and what is the maximum profit at the profit-maximizing product mix? O Scratch: 700 Purr; 166 Buzz and K1,300 700 Scratch; 0 Purr: 400 Buzz and K5,700 166 Scratch: 400 Purr; 0 Buzz and K7,400 700 of each product and K4,528
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Here, labour hour is key factor
Contribution per key factor = contribution per unit / labour hour required per unit
| Product |
Contribution per Key factor |
Rank |
| Scratch | 6/2 = 3 | I |
| Purr | 7/3 = 2.3 | III |
| Buzz | 8/3 = 2.67 | II |
that means, First we will produce Product Scratch, if labour hour remain then Buzz and then Purr.
??????Total labour hour available = 2,600 hours.
labour hour requires for product scratch = 700 x 2
= 1400
Remaining labour hour = 2600 - 1400
= 1200 hour
units of product Buzz cab be produce in 1200 hour = 1200 /3 = 400
no unit of product Purr will be produce.
Profit = contribution - fixed cost
= contribution of product scratch + contribution of Buzz - fixed cost
= (700 x 6) + (400 x 8) - 1,700
= 4,200 + 3,200 - 1,700
= 5,700
2nd option is correct: 700 scratch; 0 Purr; 400 Buzz; and K5,700
