Toy City manufactures toy motorcycles, toy cars and toy vans. The company has provided the following per unit information –

Product Direct Materials Direct Labour Selling Price Var. Manu. Cost

Motorcycles $20 $25 $100 $5

Cars $30 $40 $150 $8

Trucks $50 $80 $200 $10

The company has the capacity to produce 300,000 direct labour hours. The demand for the company’s product is 10,000, 15,000 and 20,000 units of motorcycles, cars and trucks respectively. Wages are paid at the rate of $5 per direct labour hour.

• Which product is most profitable given the limited resources? Which product is least profitable?

• Calculate the number of labour hours required to meet the demand for the company’s products.

• Identify how much of each product the company would produce given the limited resource.

• What is the highest rate per hour that Toy City would be willing to pay per hour for additional hours to meet total demand?