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7. ABC Ltd makes three products: A, B and C. Variable costs are for the use of raw materials X and Y and for direct
7. ABC Ltd makes three products: A, B and C. Variable costs are for the use of raw materials X and Y and for direct labour. Quantities used to make one unit of each product are shown in the table, together with selling price per unit: X Y litres D lab minutes Selling price per unit kg product A B 1 0.2 0.4 12 10 16 18 0.3 0.6 C 0.3 15 14 X costs 2 per kg, Y costs 3 per litre and labour is 15 per hour. Required: (i) For each of A, B and C individually, calculate the breakeven quantity needed if the fixed costs amount to 5,000. (5 Marks) (ii) Monthly demand for ABC Limited's products is thought to be A 400 units, B: 500 units and C: 200 units. How many units of each product would be manufactured to maximise profit if overall the fixed costs of the company are 5,000 and inputs are restricted as follows: a) Only 550 kg of X are available. (3 Marks) b) Only 200 litres of Y are available. (3 Marks) c) Only 125 hours of labour are available. (3 Marks) (Total 14 marks)
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