Question
Kwinana Ltd makes three types of products, the details of which are as follows: Product CT101 CT151 CT350 Selling price per unit ($) 25 20
Kwinana Ltd makes three types of products, the details of which are as follows:
Product | CT101 | CT151 | CT350 |
Selling price per unit ($) | 25 | 20 | 23 |
Variable cost per unit ($) | (10) | (8) | (12) |
Weekly demand (units) | 25 | 20 | 30 |
Machine time required per unit (hours) | 4 | 3 | 4 |
Fixed cost is not affected by the choice of product because all three products use the same machine. Machine time is limited to 148 hours a week.
Required:
a) | Which combination of products should be manufactured if the Kwinana is to produce the highest profit? |
|
b) | What is the maximum price that the business concerned would logically be prepared to pay to have the remaining CT101 machined by a subcontractor, assuming that no fixed or variable cost would be saved as a result of not doing the machining in-house? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started