QUESTION 4 (25 marks) Harvey is currently preparing its budget for the year ended 30 September 2002. The company manufactures and sells three products, Beta, Delta and Gamma. The unit selling price and cost structure of each product is budgeted as follows: Beta N$ Delta N$ Gamma NS Selling price 100 124 32 Variable costs: Labour 24 48 6 Materials 26 7 8 Overhead 10 5 6 60 60 20 Direct labour is budgeted at NS6 per hour and fixed costs at N$1 300 000 per annum. The company has a maximum production capacity of 228 000 direct labour hours. A meeting of the board of directors has been convened to discuss the budget and to resolve the problem as to the quantity of each product which should be made and sold. The sales director presented the results of a recent market survey which reveals that market demand for the company's products will be as follows: Products Units Beta 24 000 Delta 12 000 Gamma 60 000 The production director proposes that since Gamma only contributes N$12 per unit, the product should no longer be produced and the surplus capacity transferred to produce additional quantities of Beta and Delta. The sales director does not agree with the proposal. Gamma is considered necessary to complement the product range and maintain customer good will. If Gamma is not offered, the sales director believes that sales of Beta and Delta will be seriously affected. After, further discussion the board decided that a minimum of 10 000 units of each product should be produced the remaining production capacity would then be allocated so as to achieve the maximum profit possible. REQUIRED 4.1. Determine what product mix and sales mix would maximise the organisation's profit in the next year. TOTAL MARKS Marks 25 25 S