Due to a national wage agreement, you find that wage rates for skilled workers are to increase by 50% over the budget figures. There is a shortage of such skilled workers and it takes over a year to train new recruits adequately. The managing director has asked you for advice as to which order of priority on the product range would give best use of the skilled labour resources available. The cost of unskilled labour, of which there is no shortage, will go up by 20% over budget. The original budget figures for the next period before allowing for the increase in labour cost detailed above, were:

Variable overheads are recovered at the rate of £1 per labour hour. The skilled labour available amounts to 30.000 hours in the period and there are fixed costs of £22 800.
You are required to:

(a) calculate the product mix which would result in the maximum profit; (12 marks)

(b) comment on the results of the revised budget.Appendix

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Product V W X Y Z Maximum production in units 3000 4000 6000 7000 9000 Selling price per unit Variable costs per unit Material Skilled labour 4 per hour Unskilled labour 2 per hour 16 15 18 15 30 3 5 4 7 6 4 4 6 2 8 2 2 1 1 4