Darmor Ltd has three products which require the same production facilities.

Information about their per unit production costs are as follows:

All labour and materials are variable costs. Skilled labour is paid a basic rate of £6 an hour and unskilled labour is paid a basic rate of £4 an hour. The labour costs per unit, shown above, are based on basic rates of pay. Skilled labour is scarce, which means that the company could sell more than the maximum that it is able to make of any of the three products.
Product A is sold in a regulated market and the regulators have set a price of £30 per unit for it.

(a) State, with supporting workings, the price which must be charged for Products B and C, such that the company would be indifferent between making and selling any of the three products.

(b) State, with supporting workings, the maximum rate of overtime premium which the company would logically be prepared to pay its skilled workers to work beyond the basic time.

Transcribed Image Text:

Product Labour: Skilled Unskilled Materials Variable overheads Share of fixed overheads A B C 6 9 3 2 4 10 12 25 14 3 5 70 7 10 10