Section 6: Pricing and Product Mix 10 marks

Seventh Heavenprovides event planning services, offering three event packages (Core, Fairand Fusion) and customised services for clients who want to design an event from scratch. Seventh Heaven's capacity is limited by its available labour hours, where only 1,150 labour hours are available each month. The business pays its workers $25 an hour and estimates that $17,000 of materials are used each month.

The forecasted demand, revenue, costs and resources required for the next month are as follows:

	Core	Fair	Fusion
Estimated demand	13	10	12
Total revenue	$ 26,000	$ 22,000	$ 36,000
Total variable costs	$ 14,300	$ 14,000	$ 24,000
Allocated fixed costs
Material handling and storage	$ 3,800	$ 4,000	$ 4,400
Office employee's salary and benefits	$ 2,000	$ 2,000	$ 2,000
Other overhead costs	$ 500	$ 500	$ 500
Labour hours required per event	30	40	40

Required:

Suppose Seventh Heavendoes not provide customised services and only offers the three event packages. Determine how many instances of Core, Fairand Fusion should be provided to maximise profitability. (10 marks)