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19. Lenovo (Pty) has been in operation for more than ten years making two types of products, Supe and Delu. Recently, demand for their products
19. Lenovo (Pty) has been in operation for more than ten years making two types of products, Supe and Delu. Recently, demand for their products has increased substantially and they are anticipating operating constraints in the not too distant future. However, management is concerned that the demand is temporary and they are therefore not prepared to invest in further manufacturing capacity at this time. The selling price and manufacturing costs of the respective vents are: Supe (NS) Delu (N$) Manufacturing costs: Material Fixed overhead Variable overhead (Machine) 100 30 180 50 30 20 11 Labour 50 30 Lenovo has 5 100 direct labour hours (DLH) and 8 364 machine hours (MH) available. Each product requires the following labour time: It takes three direct labour hours to manufacture one unit of Supe and two direct labour hours to manufacture Delu. Machine rate per hour for both products are N$5. The sales department has projected that Supe will be sold for N$300 per unit, while Delu selling price will be N$400 per unit. Assume the following two alternative situations: Alternative one: Lenovo currently has orders totalling 800 Supe and 1 000 Delu. Alternative two: Lenovo anticipates a temporary 100% increase in demand for Supe. Demand for Delu is expected to remain at its current level (which is 1 000 units) Required Determine the optimal product mix for product Supe for alternative one which will n. profit. (You are not required to use linear programming)
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