Turley Limited produces two products, product X and Product Y. Machine and

labour is used in the production process. The company has a maximum of 1000 machine

hours and 1600 labour hour per week. Other information are as follows:

Product X Product Y

Selling price/unit $150 $136

Variable cost/unit $110 $89

Machine hours required 2 hours 4hours

Labour hours required 4 hours 4 hours

Required:

1. Calculate the contribution margin (CM) for product X and product Y. (2 marks)

2. Identify the decision variables and determine the objective function (sum of contribution margin) for the above. (2 marks)

3. Determine the constraints based on the limited resources. (2 marks)

4. Calculate the optimal number of product X and product Y in order to maximise the contribution margin. Graphs are not necessary. (6 marks)

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

Answer: