QUESTION VI (7 Marks)

Holt Company makes three products in a single facility. Data concerning these products follow:

Products

A B C

Selling price per unit $67.90 $57.70 $43.90

Direct materials 12.10 10.30 8.60

Direct labour 14.10 8.00 6.80

Variable manufacturing overhead 2.60 2.20 1.80

Variable selling cost per unit 2.50 2.20 2.50

Mixing minutes per unit 2.70 3.30 4.70

Monthly demand in units 1,000 3,000 3,000

The mixing machines are potentially the constraint in the production facility. A total of 25,800 minutes are available per month on these machines. Direct labour is a variable cost in this company.

Required:

1. How many minutes of mixing machine time would be required to satisfy demand for all four products?

2. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.)