Question
A company is planning to produce products A, B, C and D in order to satisfy market demand as per the following schedule: Product Market
A company is planning to produce products A, B, C and D in order to satisfy market demand as per the following schedule:
Product | Market DD |
A | 14,000 |
B | 8,000 |
C | 12,500 |
D | 6,000 |
The unit cost statement for these products is as follows:
A | B | C | D | |
Selling price | 480 | 250 | 400 | 800 |
Variable costs: | ||||
Direct materials @ ksh 30 per kg | 180 | 90 | 150 | 120 |
Direct labour @ ksh 10 per hour | 140 | 60 | 80 | 250 |
Variable overheads | 30 | 50 | 70 | 150 |
The management is aware that direct labour is currently in short supply and only limited amount of 350,000 hours can be availed.
Required:
Calculate the optimal contribution given the information provided.
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