A company can produce three different products from the same raw material using same production facilities. The requisite labour is available in plenty at Rs. 8 per hour for all products. The supply of raw material, which is imported at Rs. 8 per kg, is limited to 10,400 kg for the budget period. The variable overheads are Rs. 5.60 per hour. The fixed overheads are Rs. 50,000. The selling commission is 10% on sales.

  1. From the following information, you are required to suggest the most suitable sales mix, which will maximize the company’s profit. Also determine the profit that will be earned at that level.

product

Market demand required per (unit)

Selling price per unit(rs.)

Labour Hour per unit (hrs)

Raw materials required per unit(kg)

x

8,000

30

1

0.7

Y

6,000

40

2

0.4

z

5,000

50

1.5

1.5

  1. assume, in the above situation, if an additional 4,500 kg of raw material is made available for production, should the company go in for further production, if it will result in additional fixed overheads of Rs. 20,000 and a 25% increase in the rates per hour for labour and variable overheads ?