EAW Ltd produce three products and is preparing its production and sales budget for the next month.

The following information is available for the three products.

	Product X	Product Y	Product W
Sales price	600	300	100
Labour	(300)	(160)	(40)
Other variable costs	(90)	(68)	(14)
Demand	200	600	1,000

Labour is costed at 20 per hour

In the following month labour is restricted to 7,800 hours

Fixed costs for the month will be 45,000

Required

a, Calculate the optimum product mix

b, The sales manager has the opportunity for a special contract that requires 3,000 hours and will earn contribution of 85,000. Calculate the relevant cost of obtaining these hours and recommend on financial grounds whether EAW should accept the contract.