Question 2 (35 marks) Part A (20 marks) Tangi Limited produces and sells three products: cream, omaere and yoghurt from the same input material, milk. The products are considered organic and as a result they sell for a good price in the market in comparison to other competitor's products. The three products are each packaged in containers of 1 litre. Each 1 litre container is equal to 1 unit of the product and 1 unit of one product is the same with 1 unit of the other product. The following is the information pertaining to each product per unit: Cream NS 42 14 Omaere NS 32.5 12 Yoghurt NS 37 Selling price per unit Direct materials (N$2/ litre) Direct wages (N$2.50 per hour) Variable overheads Fixed cost per unit Profit per unit 12.5 7.51 5 8 3 8.5 1.5 2.5 7 The forecasts for the forth-coming period indicates that the maximum demand from customers will be as follows: Cream - 6 000 units Omaere - 8 000 units Yoghurt - 9 000 units You have been hired as the management accountant of Tangi Limited and you have been informed that the company is able to hire as many laborers as would be required without any problem and the same applies to machines. However, due to the current drought facing Namibia, the milk will be in short supply. A forecast of milk supplies indicates that the supply of milk will be limited to 114 000 litres. 2.1 Requirement Marks Assuming there is no constraining resource, determine the maximum contribution that Tangi Limited will be able to achieve in the forth-coming period. Given that materials are now limited to 114 000 litres, determine the optimum production mix that will maximise Tangi Limited's contribution for the forth coming period. Calculate what total contribution they will make out of your recommended production mix. How can the management of Tangi Limited overcome the milk constraint that 2.3 they are currently facing? Total 2.2