Intermediate: Limiting key factors PDR pic 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 maximise the weekly profit of PDR pic and prepare a profit statement showing the profit your plan will yield. (10 marks)

(b) The marketing director of PDR pic is concerned at the company’s inability to meet the quantity demanded by its customers.
Two alternative strategies are being consid¬ ered 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 includ¬ ing carriage. This would need to be re¬ packaged 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 (quantita¬ tive 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 Fixed overhead* 8 8 16 16 Profit 8 9 7 6 Labour hours I 2 2 Machine hours 4 3 4 5 Units Units Units Units Maximum demand 200 180 250 100 per week