Dertago Limited manufactures special paint. Two varieties of the paint are produced, Texite and Glatile. The following data relates to the products.

	Texite	Glatile
Selling price per unit (10kg can)	$300	$460
Direct material	$40	$65
Direct labour	$100	$200
Variable overhead	$12	$15
Variable selling costs	$5	$8
Total variable costs/unit	$157	$288

Highly skilled staff are required to manufacture the paint and this is in short supply, thus considered to be a scarce resource. It takes 2 labour hours to produce one 10kg can of Texite and 4 labour hours to produce a 10kg can of Glatile.

Required:

1. Calculate the contribution margin per unit for Texite and Glatile. (2 mark)

2. Which product is more profitable, Texite or Glatile, given the limited resource of labour. Show all workings. (3 marks)

3. Dertago only has a maximum of 1600 labour hours per day and the daily demand for Texite paint is 750 units. There is unlimited demand for Glatile paint. How many units of each type of paint should be produced to maximize the total contribution margin? (4 marks)

4. What is the total contribution margin at the optimal level? (2 marks)