Bogue Inc. produces four unique items: A, B, C and D. Information relating to the products and
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Question:
Bogue Inc. produces four unique items: A, B, C and D. Information relating to the products and resources as outlined below:
A | B | C | D | |
Sales price | $4.00 | $3.00 | $4.80 | $6.40 |
Material costs | $1.60 | $1.20 | $3.60 | $2.40 |
Direct labour cost | $1.20 | $0.80 | $0.60 | $1.60 |
Machine time | 4 | 2 | 3 | 5 |
Labour time | 2 | 3 | 4 | 2 |
Monthly demand | 4,000 | 4,000 | 5,000 | 3,000 |
Note: machine and labour time above are stated in minutes
Machine time is a bottleneck resource and maximum capacity is 800 machine hours. Operating cost which includes direct labour costs are $14,400 per month. The direct labour costs are $10 per hour.
Required:
a) Determine the profit maximizing outputs and the maximum profit.
b) Calculate the TPAR at this profit maximizing output.
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