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Cordelia plc manufactures three spice mixes for catering firms: Mild, Spicy and Hot. The selling price and the variable costs per unit for each product
Cordelia plc manufactures three spice mixes for catering firms: Mild, Spicy and Hot. The selling price and the variable costs per unit for each product are as follows: Mild 30 Spicy 40 Hot 60 Selling price Variable cost Spice A Spice B 10 10 23 5 25 15 Spice B is in short supply and this year Cordelia is only able to purchase 240,000 kilos at 5 per kilo. Spice A is plentiful. The marketing manager predicts that the maximum demand for each product for the year will be: Mild Spicy Hot Units 80,000 16,000 30,000 The fixed costs for the year are estimated at 300,000. Required: i. Calculate, using a contribution based approach, the mix of sales which would enable Cordelia to maximise profits and the resulting profit for the year. (6 marks) ii. What technique could be used to determine the optimal mix if Spice A was also in short supply? (1 mark)
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