The following particulars are extracted from the records of a company:

(a) Comment on the profi tability of each product (both use the same raw material) when (i) Total sales potential in units is limited.
(ii) Total sales potential in value is limited.
(iii) Raw material is in short supply.
(iv) Production capacity (in terms of machine hours)
is the key factor.

(b) Assuming raw material is the key factor, availability of which is 20,000 kgs and the maximum sales potential of each product being 7,000 units, fi nd the product mix which will yield the maximum profi t.

Transcribed Image Text:

Product X Sales per unit Rs. 200 Product Y Rs. 240 Consumption of material 2 kgs 3 kgs Material cost Rs. 20 Rs. 30 Direct wages cost Rs. 30 Rs. 20 Direct expenses Rs. 10 Rs. 12 Machine hours used 3 2 Overhead expenses: Fixed Rs. 10 Rs. 20 Variable Rs. 30 Rs. 40 Direct wage per hour is Rs. 10.