The management of a business is concerned about its inability to obtain enough fully trained labour to enable it to meet its present budget projection.

The amount of labour likely to be available amounts to £20,000. All of the variable labour is paid at the same hourly rate. You have been asked to prepare a statement of plans, ensuring that at least 50 per cent of the budgeted sales revenues are achieved for each service and the balance of labour is used to produce the greatest profit.

Required:
(a) Prepare the statement, with explanations, showing the greatest profit available from the limited amount of skilled labour available, within the constraint stated. Hint: Remember that all labour is paid at the same rate.
(b) What steps could the business take in an attempt to improve profitability, in the light of the labour shortage?

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Service Alpha Beta Gamma Total £000 £000 £000 £000 Variable cost: Materials Labour 15 4 27 12 Expenses Allocated fixed cost 33 82 19 101 15 27 12 Total cost 24 Profit 15 39 2 Sales revenue 33 29