Miss Kay Ltd (MKL) is a company whose shareholders are only interested in one thing profit maximization. The company makes cosmetic products and uses kryptonite as one of the key components, and with kryptonite being a rare chemical, its supply is limited. MKL uses kryptonite to make four cosmetic products which are A1, B2, C3 and D4, and the company has at present 5,000 kg of kryptonite at a value of $50,000. There is no way MKL can purchase any additional kryptonite in the near future, and therefore it is up to the company to make the best use of the rare chemical to maximize the companys profit. Production information that concerns the next period is presented below:

	Product
	A1	B2	C3	D4
Sales (units)	4,000	9,000	6,000	7,000
Sales price per unit	$80	$70	$120	$90
Labour hours required per unit	1.0	1.4	2.2	1.1
Material required per unit (grams)	600	400	700	900

The labour rate per hour is $40.

Required:

1. What is the per unit material cost of each product?

2. What is the per unit labour cost of each product?

3. What is the total unit direct cost of each product?

4. What is the unit contribution margin of each product?

5. What is the unit contribution margin of each product, considering the restricted supply of the key component?

6. Assuming that you are a production manager working at MKL, advise what product(s) the company should be making during the next period. Clearly state a priority for each of MKLs four products, taking account of Questions 4 and 5.

7. Once you have a priority assigned for the four products and having taken account of their contribution margins as per the limiting component (i.e. kryptonite), clearly state the number of units of the top two products that should be produced in the next period and the total contribution margin that arises from the sale of the companys top two products. Note: (a) Refer to the budgeted sales units that are provided in the question, and (b) bear in mind that the companys goal is to maximize profit so they would like to sell as many units as possible of their top product.