Self-test Kings Ltd manufactures a range of four products for which it has had a steady demand during 2010. The company has now experienced a month (March 2011)

when it was unable to meet the increased demand and feels that it is possible that this higher demand level will continue throughout the year and beyond.

An initial report was presented to management which showed that unless additional machinery was purchased, the demand could not be satisfied.

Kings Ltd has decided that it does not want to commit to additional machinery at this stage because of the high capital cost. It therefore requires you to advise the company of the optimum production that can be achieved in order to maximise profits.

The following data relates to the four products:

Product 1234 Selling price per unit 60 40 70 80 Variable costs per unit 33 20 40 42 Machine hours per unit 3 5 6 7 Maximum sales in units 1,800 1,900 1,400 1,100 The company has at present three machines which all make the four allied products. The total capacity of these machines is 21,900 hours.

The directors of Kings Ltd also require you to forecast monthly profit using the optimum production levels where fixed costs for the month total £62,000.