Limiting key factors PDR ple manufactures four products using the same machinery. The following details relate to its products:

There is a maximum of 2000 machine hours available per week.
Requirement:

(a) Determine the production plan which will maximize the weekly profit of PDR ple and prepare a profit statement showing the profit your plan will yield. (10 marks)

(b) The marketing director of PDR plc is concerned at the company’s inability to meet the quantity demanded by its customers.
Two alternative strategies are being considered to overcome this:
(i) to increase the number of hours worked using the existing machinery by working overtime. Such overtime would be paid at a premium of 50% above normal labour rates, and variable overhead costs would be expected to increase in proportion to labour costs.
(ii) to buy product B from an overseas supplier at a cost of £19 per unit including carriage. This would need to be repackaged at a cost of £1 per unit before it could be sold.
Requirement:
Evaluate each of the two alternative strategies and, as management accountant, prepare a report to the marketing director, stating your reasons (quantitative and qualitative) as to which, if either, should be adopted.

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Product Product Product Product A B C D per per per per unit unit unit unit Selling price 28 30 45 42 Direct material 5 6 8 6 Direct labour 4 4 8 8 Variable overhead 3 3 6 6 Fixed overhead* 8 8 16 16 Profit 8 9 7 6 Labour hours 1 1 2 2 Machine hours 4 3 4 5 Units Units Units Units Maximum demand 200 180 250 100 per week