A company producing two products P and Q using a single production process furnishes the following cost data:
|
|
Product P |
Product Q |
|
Selling Price per unit (Rs.) |
20 |
30 |
|
Variable Cost per unit (Rs.) |
11 |
16 |
|
Machine hours required per unit of production (hrs) |
1 |
2 |
|
Market Limitation (units) |
1,00,000 |
2,50,000 |
Total machine hours available — 4,00,000; Fixed Cost per annum — Rs. 26,00,000.
Considering the limiting factors of machine hours and market limitations, you are required to:
- Indicate the best combination of products to give an optimum contribution.
- Show the additional machinery requirement to be augmented on rental basis at an annual rent of Rs. 1,50,000 per machine to provide an additional capacity of 30,000 hours per machine.
- Change in number of machines to be rented if the annual rental charges reduce to Rs. 1,25,000 per machine.