=+8-26 KK Choosing customers OBJECTIVES 5, 6 Broadway Printers operates a printing press with a monthly capacity of 2000 machine-hours. Broadway Printers has two main customers: Taylor Ltd and Kelly Ltd. Data on each customer for January follows:

Taylor Ltd Kelly Ltd Total Revenues $120 000 $80 000 $200 000 Variable costs 42 000 48 000 90 000 Contribution margin 78 000 32 000 110 000 Fixed costs (allocated) 60 000 40 000 100 000 Operating profit $18 000 $(8 000) $10 000 Machine-hours required 1500 hours 500 hours 2000 hours Kelly Ltd indicates that it wants Broadway Printers to do an additional $80000 worth of printing jobs during February. These jobs are identical to the existing business Broadway Printers did for Kelly Ltd in January in terms of variable costs and machine-hours required.

Broadway anticipates that the business from Taylor Ltd in February will be the same as that in January. Broadway can choose to accept as much of the Taylor Ltd and Kelly Ltd business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January.

Required What action should Broadway Printers take to maximise its operating profit? Show your calculations.