Bombay Limited is capable of producing four products in the next production planning period.
Estimates of cost, sales and production data are given below, per unit of each product:
Products Wam Xam Yap Zap
GH¢ GH¢ GH¢ GH¢
Selling price (per units) 380 450 700 470
Cost per unit: Labour at ¢20/hr 60 40 140 100
Material at ¢10/kg 60 180 100 120
Variable overheads 20 30 40 50
Maximum demand (units) 5,000 6,000 5,500 4,500

Required:
(i) Determine the most appropriate production mix under the assumption that material islimited to 189,400kgs. [6 Marks]
(ii) Determine the most appropriate production mix under the assumption that labourhours available is limited to 80% of full requirement. [8 Marks]
(iii) Calculate total contribution from each production mix determined in requirement (i)and (ii) above. [4 Marks]
(iv) Management has limited financial resources to spend either on material or labour.Recommend to management whether it should choose material or labour as theconstraint based on your computation in requirement (iii) above. [3 Marks]
(v) Outline four (4) qualitative factors are likely to influence your decision?

Answer rating: 100% (QA)

Solution i To determine the most appropriate production mix under the assumption that material is limited to 189400kgs we need to optimize the production mix to meet the maximum demand while minimizin... View the full answer