A company manufactures 2 products XZ and YZ using a single production process. The following cost data is available for the same:

Particulars 'XZ' 'YZ'

Selling price per unit Rs 40 Rs 60

Variable cost per unit Rs 22 Rs 32

Machine hours required per unit 2 4

Demand in units 200000 500000

Total machine hours available: 800,000 hours

Fixed Costs: Rs 52,00,000

Considering the limiting factors of machine hours and market demand, you are required to

a) Indicate the best combination of products to give optimum contribution. Prepare a statement showing profit at that optimal mix.

b) Show the additional machinery requirement that can be met by renting machines at an annual rent of Rs. 125,000 per machine and providing additional capacity of 60,000 hours per machine. Also prepare Profitability statement if the additional machines are taken on hire.

c) What do you understand by Limiting factor? How is it relevant for deciding the optimal product mix? What could be the limiting factor in terms of resources for the business?