Question
Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted data is as follows: Product X () Product Y () Product Z ()
Battenball Ltd. Manufactures three products using the same direct labour force. Budgeted data is as follows:
Product X () Product Y () Product Z ()
Sale price per unit 8 18 22
Variable cost per unit 6.5 12 15
Fixed cost per unit 0.5 4.5 4
Total cost per unit 7 16.5 19
Profit per unit 1 1.5 3
Direct Labour hours per unit hour 1 hour 2 hours (X,Y,Z)
Budgeted monthly sales 500 units 300 units 400 units (X,Y,Z)
QUESTION: Suppose extra direct labour hours a month upto a maximum of 250 hours a month can be made available in the overtime. What additional product should be planned to use up the extra hours available (if required) in order to maximize profits and by how much would profits increase? (Assume no charge in fixed cost) Units of X Units of Y Units of Z Extra profit per month a) None None None 0 b) 100 0 100 350 c) 350 50 0 325 d) 400 0 25 275
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