assuming raw material is the key factor availability of which is 20 000 kgs and the 608741

Aug 29, 2021 | Uncategorized

The following particulars are extracted from the records of a company:

Product X

Product Y

Sales per unit

Rs. 200

Rs. 240

Consumption of material

2 kgs

3 kgs

Material cost

Rs. 20

Rs. 30

Direct wages cost

Rs. 30

Rs. 20

Direct expenses

Rs. 10

Rs. 12

Machine hours used

3

2

Overhead expenses:

Fixed

Rs. 10

Rs. 20

Variable

Rs. 30

Rs. 40

Direct wage per hour is Rs. 10.
  1. Comment on the profitability of each product (both use the same raw material) when
    1. Total sales potential in units is limited.
    2. Total sales potential in value is limited.
    3. Raw material is in short supply.
    4. Production capacity (in terms of machine hours) is the key factor.
  2. Assuming raw material is the key factor, availability of which is 20,000 kgs and the maximum sales potential of each product being 7,000 units, find the product mix which will yield the maximum profit.