Reference no: EM132551119

Flying Star Ltd (FSL) manufactures two products (raincoats and golf jackets) using the same production facilities and labour for each product. The company is very short of machine capacity and has available to it a total of only 10,000 machine hours. The capacity constraint cannot be lifted within the next year as there is a 12-month delivery and installation period on new machines. The selling price and cost per unit of the two products are as follows: Raincoats Golf Jackets Selling Price $23 $50 Direct Material 3 6 Direct Labour 9 18 Variable Overhead 4 14 Fixed Overhead 5 10 Profit (loss) 2 2 The fixed overhead is allocated to the products on the basis of direct labour hours. The total fixed overhead is $50,000. Raincoats require machine time of 1 hour while golf jackets require 2 hours. Based on the current market situation, the maximum number of raincoats and golf jackets which could be sold is 8,000 and 5,000 respectively.

Required:

Question 1: For the limited resources of 10,000 machine hours, determine the most profitable product mix (number of units of each product to be produced) AND the amount of profit earned based on your proposed product mix.