Advanced : Maximizing profit and sales revenue us ing the graphi ca l approach Goode, Billings and Prosper pic manufactures two products, Razzle and Dazzle. Unit selling prices and variable costs, and daily fixed costs are:

Production of the two products is restricted by limited supplies of three essential inputs: Aaz, Ma, and T az. All other inputs are available at prevailing prices without any restriction. The quantities of Aaz, Ma, and T az necessary to produce single units of Razzle and Dazzle, together w1th the total supplies available each day, are·

William Billings, the sales director, advises that any combination of Razzle and/or Dazzle can be sold wijhout affecting their market prices. He also argues very strongly that the company should seek to maxim1ze its sales revenues subject to a minimum acceptable profit of £44 per day in total from these two products.
In contrast, the financial director. Silas Prosper, has told the managing director, Henry Goode, that he believes in a policy of profit maximization at all times.
You are required to:

(a) calculate:
(i) the profit and total sales revenue per day, assuming a policy of profit maximization, (10 marks)
(ii) the total sales revenue per day, assuming a policy of sales revenue maximization subject to a minimum acceptable profit of £44 per day, (10 marks)

(b) suggest why businessmen might choose to follow an objective of maximizing sales revenue subject to a minimum profit constraint

Transcribed Image Text:

Selling price per unit Variable costs per unit Contribution margin per unit Joint fixed costs per day Razzle Dazzle () 282 20 12 1824 () 30 20 10 60