wrong =5 down votes be careful

illustration 30. (Optimum Mix)( 1MY A company produces four products A,B,C, and D which marketed in cartons. Of the total of 20 machines installed, 8 are suitable for manufacturing all the four products and the remaining 12 machines are not suitable for the Each machine is in production for 300 days per year and each is used on a given product in terms of ful days and not in fractions of days. The company however has not problem in obtaining adequate supplies of labour and manufacture of products A and D. raw materials. The marketing policy is that all four products should be sold and the minimum annual production should be 3000 cartons for each product. Fixed costs budgeted amount to 250 lacs, production cost and price data are as 106 9.14 under- st B D 14 4 3 6 7810 790 845 1290 45 Bagh 140 52 90 132 224 148 Production/day/machine (cartons) Selling price/carton Cost: Process Direct Materials/day Machine Direct Labour/day/Machine Process II Direct Material/Carton Direct Labour/Carton Variable Overheads/Carton 30 30 30 30 *240 300 360 216 390 720 300 390 117 DOST MANAGEMENT - DECISION MAKING Dection Moking Techniques mg view to meeting the increasing demand for products A and D, the company is contemplating to conven products A ond D into al purpose machines. The cost of conversion of these machines is 32,10,000 per machines The spenditure is to be amortized over a period of three years. The company expects 12.5% return on this expenditure. Mortent research indicates that the company's sales products A and D can be increased to 37,500 cartons and 5.400 cortons respectively. Required le) Colcciate the optimum profit of the company if the existing machines were worked on most profitable basis before conversion b) Recommend the maximum number of machines to be converted into all purpose machines giving supporting calculations ld Colculate for the first year the optimum profit of the company after conversion of the required number o machines into all-purpose machines. Solution