2. The Frimley Manufacturing Company makes products A, B and C using two secret raw materials, a powder costing E1 per kilogram and a liquid costing $10 per litre. The following table shows the quantities of material used for each unit of product, production times, projected sales volumes for the next year and the selling price. Product A B C Powder 1 kg 2 kgs 3 kgs Liquid 0.2 litres 0.1 litres 0.5 litres Machine time 1 hour 0.5 hours 4 hours Labour hours 2 hours 2.5 hours 3 hours Budgeted sales units 12,000 6,000 3000 Selling price E76 E82 E250 The cost of labour is E14 per hour, and machine time costs $20 per hour. Required a) Calculate the contribution margin for each of the three products, and state whether this will cover the overhead costs of E600,000 expected for the year. (10 Marks) b) The company has learned that supplies of raw material available for the year will be limited as follows: Powder 35,000 Kg Liquid 2,500 litres Calculate the optimum level of production for each product, and comment on the effect this will have upon profitability. (10 Marks)