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:

  1. Indicate the best combination of products to give an optimum contribution.
  2. 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.
  3. Change in number of machines to be rented if the annual rental charges reduce to Rs. 1,25,000 per machine.