Question 1 (topic 8: Pricing and product mix decisions)

Company A produces two products X and Y with contribution margins of $30 and $25 respectively. The company has a maximum of 1200 machine hours and 3000 labour hours per month.Product X requires 1 machine hour per unit while product Y requires 2 machine hours per unit. Product X requires 3 direct labour hours per unit while product Y requires 2 direct labour hours per unit.

Required:

a.Determine the number of product X and Y to be produced to maximise the contribution margin.

b.What is the value of the 'objective function' at the optimal point? (3 marks)