A company has 4,000 machine hours of plant capacity per month which are to be allocated to products A and B. The following per unit figures relate to the products:

Product A B

Sale Price 300 240

Costs:

Direct Material 100 70

Direct Labour 65 50

Variable Overhead 20 40

Fixed Overhead 15 30

Variable Operating Expenses 40 20

Total Costs 240 210

Net Income 60 30

Machine Hours Required 1.5 1.00

ssuming that the company can sell all its products A output but only 3,500 units of product B ,

determine how many machine hours shall be allocated to each product.

REQUIRED:

1. Assuming that the company can sell all its products A output but only 3,500 units of product B, determine how many machine hours shall be allocated to each product. [7 marks]
2. Calculate optimal product mix. [6 marks]

How much is total contribution in terms of money?