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A company produces two products, A and B , the production costs of which are shown below: A B K K Direct material cost 1
A company produces two products, A and B the production costs of which are shown below:
A B
K K
Direct material cost
Direct labour material cost
Variable overhead
Fixed overhead
Total production cost
Fixed overhead is absorbed on the basis of direct labour cost.The products pass through two processes,Y and Zwith associated labour cost of K per direct labour hour in each.The direct labour associated with the two products during these processes is shown below:
Process Time Taken
Product A Product B
Y mins mins
Z mins mins
Selling prices are set by the market,the current market price for A being K and that for B K At these prices, the market will absorb a many units of Aand B as the company can produce. The ability of the company to produce A and B is limited by the capacity to process the products in Y and ZThe company operates a twoshiftsystem,giving working hours per day.Process Z is a singleprocess line, and for technical reasons this line can only be operated for a maximum of hours per day.Process Y is a dual processline,and thus two units can be processed simultaneously, although this douuubles the requirement for labour. Process Y operates for the full working hours each day.
You are required to: Based on the above information,what production plan should the company follow in order to maximize profit?
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