The following particulars are extracted from the records of a company.
Particulars Product A Product B
Sale price per unit Rs.100 Rs.120
Consumption of material 2kg 3 kg
Material cost Rs. 10 Rs. 15
Direct labour cost 15 10
Direct expenses 5 6
Machine hours used 3 2
Fixed overheads per unit Rs. 5 Rs. 10
Variable overheads per unit 15 20
Direct labour per hour is Rs.5. Comment on the profitability of each product [both
use same raw material] when,
J] total sales potential in units is limited
IJ] Total sales potential in value is limited
II] Raw material is in short supply
IV} production capacity [in terms of machine hours] is limited.
B] Assuming raw material as the key factor, availability of which is 10,000 kg and
maximum sales potential of each product being 3500 units, find out the product
mix which will yield maximum profits.