The Paradise Island Building Company builds three types of residence, details of which are shown below. It has always concentrated on the luxury end of the market where prices and profits are highest. Recently the government has required work permits for all building workers, and the company is allowed to use only

(a) 30,000 hours a year or

(b) 51,000 hours. What other factors might be taken into consideration in the decision?

You are required to calculate:
a the contribution for each type of home;
b the amount of contribution per unit of limiting factor, assuming first there are 30,000 labour hours available and, second, there are 51,000 labour hours available;
c its optimum building plan, and the total contribution it would generate;
d any other factors you think should be taken into consideration in making this decision.

Transcribed Image Text:

Holiday chalets Terraced houses Luxury villas Annual demand 20 30 10 Labour hours to build a home 300 600 3,000 000 000 000 Selling price per home 100 200 800 Variable costs per home 70 120 420