QUESTIONS 1

A company produces two products, Alpha and Beta, details of which are as follows:

AlphaBeta

Material X at R5 / kg1020

Labour at R2 / hour2010

Variable machine costs at R3 / hour129

Variable costs66

Selling price6060

Demand1 0001 000

Material is restricted, owing to import restrictions, to 5 000kg monthly.

The machine hour capacity of the company is 6 000 hours monthly.

There are no opening or closing of stocks.

You are required to show, with reasons:

4.1 The production plan the company should follow to maximise profits, and the

contribution so arising.(6Marks)

4.2 The minimum selling price the company could quote on a special order which required the under mentioned costs: (7Marks)

Material X R1 000, Labour R1 000, Machine time R150, and Variable costs R400

4.3 If Alpha and Beta can be purchased at a price of R52 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits.(7Marks)