Jackson Demetrios Limited manufactures three different types of office desk. Type A has extra drawers, type B has a printer shelf and type C has a moveable footrest. In the company’s present factory, production facilities are limited and there is a restriction on the number of machine hours available. The directors have considered moving to larger premises, but they are unwilling to make the move just at the moment because of fears of a downturn in the office furniture market.

Cost and selling price information for each type of desk is as follows:

Machine hours available are 4000 hours during 2013. You are required to:

i) Advise the directors on the most profitable production plan available to them without further expansion of the premises.

ii) Calculate the overall contribution to fixed costs (to the nearest £) if your recommended production plan is followed.
 

Selling price per unit Variable materials costs Wood Plastics Screws and fixings Variable labour costs Machine hours required per unit Sales demand for 2013 Type A 175 37 16 2 18 2.5 hours 1 400 Type B 160 35 15 2 16 2.0 hours 1 600 Type C 165 35 18 2 16 2.1 hours 1 550