(a) For each bike model calculate the contribution for the machine hour constraint AND a discussion ofthe impact of the machine hour constraint in the selection of production priority.(b) The production plan that will maximise profits if no outsourcing is allowed AND a statement of theexpected profits. Comment on the profitability of the plan. (c) Discuss the implications of accepting the current production plan, without outsourcing any of the VSBmodels.

plans on the way. Investigation into the budgeting process for next year revealed that forecast demand would exceed current production capacity and management needs to address this short-term problem. The four different types of bikes are manufactured using one machine process. Table I below shows the estimated standard costs for the models. Table 1. Costs for the range of e-Bikes VSB-1 VSB-M VSB-F VSB-G Variable costs Materials 285 415 495 635 - Machine hours ($45.00 per hour) 135 315 360 450 Assemblers ($35.00 per hour) 70 210 175 245 Fixed overheads 155 310 520 620 Total Cost (per bike) $645 $1,250 $1,650 $1,950 The company's budgeted fixed overhead for the period is $697,500. These fixed overheads are unavoidable in the short-term and are absorbed into products on the basis of total labour hours. The production team has confirmed that the machine capacity of the company is currently 9,600 hours per year. The machine capacity cannot be increased during the year for which the budget is being prepared. The purchasing manager was informed of this limitation and has found a reputable firm that could supply the company with any of VSB e-Bike model at an acceptable price. The feedback VSB received from customers is positive: they like the bikes because of their quality and reliability. Unwilling to risk the reputation of their firm, the managing director is reluctant to outsource the production of their bikes, and fear that subcontracting will negatively affect profits. Table 2 shows the information obtained from the marketing team with respect to the estimated demand and sales price for the forthcoming years Table 2. Expected sales and prices of e-Bikes VSB-1 VSB-M VSB-F|VSBG Expected sales 100 450 500 300 Price per bicycle $850 $1,155 $2,050 $2,450