Benkhadour Co. manufactures four different products. Because the quality of its products is high, the demand for them is more than the company can produce.

Based on the enquiries made by current and potential customers, you have estimated the following for the coming year:

The following information is also available:
1. The direct labour rate is $15 per hour and the factory has a capacity of 80,000 hours. For the next year, Benkhadour is unable to expand this capacity.
2. Benkhadour is unwilling to increase its selling prices.
3. Apart from direct materials and direct labour, the only other variable expense is variable overhead. The variable over- head is 50% of the direct labour cost.
4. Fixed manufacturing overhead is estimated to be $1 million for the coming year. Fixed marketing and administrative expenses are estimated to be $750,000 for the coming year.
Instructions
Determine which products and how many units of each Benkhadour should produce in the coming year in order to maximize its operating income.

Transcribed Image Text:

Estimated Demand in Units 8,000 24,000 20,000 30,000 Selling Price per Unit $ 50 60 150 100 Direct Materials Cost per Unit S 5 10 25 15 Direct Labour Cost per Unit Product S 5 30 20