Soreno. inc manufactures three different types of desks: wood, Rubber, and Plastic. Now, space is limited in the factory and there is a restriction on the number of machine-hours available. Costs and selling price information for the financial year 1 January to 31 December 2021 for each type of desk is as follows:

	Wood Desk	Rubber Desk	Plastic Desk
	$	$	$
Selling price per unit	1,750	1,600	1,650
Variable materials costs:
Wood and plastics	480	460	486
Screws and fixings	20	20	20
Variable labour costs	180	160	160
Variable machine costs	50	40	44
Share of fixed costs	220	240	200
Machine hours required per unit	2.5 hours	2.0 hours	2.2 hours
Sales demand in units for 2019	1350	1550	1450

Machine hours available are 4,000 hours during 2021.

Fixed costs for 2021 are expected to be $940,000.

Required:

(a) Calculate the number of units the business would need to sell to break even if it were to produce only Plastic Desk in 2021. (Assume for this that there is no effective limit to market size and resource availability).

(b) Advise the directors of Soreno. inc on the combination of products that should be manufactured if the business is to produce the highest profit without further expansion of the premises. Is there any unsatisfied demand?

(c) Show a profit statement for Soreno.inc if your recommended production plan in (a) is followed. (Round to nearest unit/$ where necessary)

Answer rating: 100% (QA)

Answer Step by Step Explanation a Number of plastic desk to be sold Fixed cost Contribution margin p... View the full answer