ACME Incorporated produces multiple products.  Data per unit for Product A is as follows:

 

Selling price	$25
Direct material	12
Direct labour	5
Variable overhead	2
Fixed overhead	3

 

The direct labour rate is $20 per hour and material costs $3 per gram. 

 

Required: 

1. Calculate the profitability of the product (profitability index) if there is a limit on the amount of labour available.  (3 marks)
2. If Product B has a profitability index of $18, should the company focus on Product A or Product B to maximize profit?