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Section 6: Pricing and Product Mix Seventh Heaven provides event planning services, offering three event packages (Core, Fair and Fusion) and customised services for clients
Section 6: Pricing and Product Mix Seventh Heaven provides event planning services, offering three event packages (Core, Fair and 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 Heaven does not provide customised services and only offers the three event packages. Determine how many instances of Core, Fair and Fusion should be provided to maximise profitability
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