Big Brothers Ltd has provided the following data relating to its two most popular models of

an electronic product.

Standard Deluxe

$/unit $/unit

Selling price 60 100

Direct material 10 20

Direct labour 15 25

Manufacturing overhead @ $30/machine hour 45 60

Monthly demand (units) 20 000 15 000

The fixed manufacturing overhead component included in the above unit costs is $20 per

machine hour.

On the very first day of June, a major piece of manufacturing equipment was damaged. It

would take two weeks for replacement parts to arrive from Germany.

Consequently, there would be only 50 000 machine hours available in June to manufacture

the two models of the electronic product.

Required:

(a) Given the limited machine hours available in June, present a comparative financial

analysis. (8 marks)

(b) Based on the above financial analysis, determine how many units of each product

should be produced in that month to maximise Big Brothers Ltd's profitability.

(6 marks)