How should ghb allocate its production capacity

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Reference no: EM131969028

Problem

GHB Company produces a salt-free, whole-grain bread and a carob-chip cake. The demand for these products is exceeding GHB's production capacity. The company has only 80,000 direct labor hours available. A case of bread requires one direct labor hour, while a case of cookies requires half a direct labor hour. The company estimates that it can sell 100,000 cases of bread and 50,000 cases of cookies in the next year. The following financial information is available:

                                     BREAD        COOKIES
Selling price per case         $60               $30
Variable costs per case      $25               $10

How should GHB allocate its production capacity between bread and cookies.

Reference no: EM131969028

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