Managerial accounting

Tactical product mix decisions An air conditioning ducting company can produce two types of ducting, folded steel ducts or wound metal round ducts. Both products use similar materials however each takes a different amount of production resources to produce. Recently, due to a safety audit, the company was advised it had to update its factory premises so for three months they will have limited machine hour capacity of 840 machine hours on their main assembly lines, however the company wants to maximise profitability over this period. The following information is known about their normal production usage of labour hours: Folded Ducting Round ducting Sell Price (per metre) $158.00 $181.00 Variable production costs per metre $95.00 $99.75 Contribution margin (SP-VC) $63.00 $81.25 Machine hours to produce: 0.2 0.25 Weekly Demand (if all orders could be fulfilled in metres) 2500 1900 Required: During the next month while machine hours are limited, calculate the quantities of each product the company should produce over the three months to maximize profit