a) Calculate the short fall in capacity for the period, based on operating the existing machines for 2 x 7 hour shifts per day for a 5-day week.

b) Determine the maximum weekly profit possible from each proposal. 

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Superior Coffee manufactures three types of superior grade coffee packs, details of which are as follows: Royal Colonial Blend Product Edo Blend Blend Selling price per unit (S) 84 72 62 Variable cost per unit (S) 44 36 30 Weekly demand (units) 300 400 500 Machine hours per unit 3 4 Additional information: Fixed costs are S12,500 per week. The company currently has 40 machines to manufacture the coffee packs, which is still insufficient capacity to satisfy demand. Due to an increase in demand recently after successful marketing efforts globally, the company is considering three separate proposals as below: (i) To operate the machines at the present capacity of 2 x 7 hour shifts per day for a five-day week. (ii) To change to 3 x 7 hours shifts per day for a 5-day week, where upon variable costs of each product would rise by 10% per unit and fixed costs would increase by $5,000 per week. (iii) To install 10 extra machines, and to operate on the normal 2 x 7 hour shifts per day for a 5- day week, where upon fixed costs would increase by $7,500 per week. 4. Superior Coffee manufactures three types of superior grade coffee packs, details of which are as follows: Royal Colonial Blend Product Edo Blend Blend Selling price per unit (S) 84 72 62 Variable cost per unit (S) 44 36 30 Weekly demand (units) 300 400 500 Machine hours per unit 3 4 Additional information: Fixed costs are S12,500 per week. The company currently has 40 machines to manufacture the coffee packs, which is still insufficient capacity to satisfy demand. Due to an increase in demand recently after successful marketing efforts globally, the company is considering three separate proposals as below: (i) To operate the machines at the present capacity of 2 x 7 hour shifts per day for a five-day week. (ii) To change to 3 x 7 hours shifts per day for a 5-day week, where upon variable costs of each product would rise by 10% per unit and fixed costs would increase by $5,000 per week. (iii) To install 10 extra machines, and to operate on the normal 2 x 7 hour shifts per day for a 5- day week, where upon fixed costs would increase by $7,500 per week. 4.

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A computation of shortfall in capacity for the period total hours required to meet demand weekly demand machine hours per unit of all three products 3... View the full answer