Solution-What is the maximum amount SRK Ltd would be

What is the maximum amount SRK Ltd would be willing to pay

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Reference no: EM132817668

Question - SRK Ltd produces three different products. The following per unit data is available.

	Product A1	Product B1	Product C1
Selling price	$135	$179	$197
Direct material costs per unit	$32	$38	$53
Direct labour costs per unit	$21	$17	$27
Variable overhead costs per unit	$25	$27	$27
Fixed overhead costs per unit	$40	$50	$50

It takes a machine 0.3 hours to produce product A1, 0.75 hours to produce product B1 and 0.5 hours to produce product C1.

Required -

a. Compute the contribution margin per unit of machine hour for products A1, B1 and C1.

b. Assume the machine has a limited capacity of 500 machine hours per month. Which product(s) should the organisation produce in order for it to maximise its profit? Then calculate the highest possible profit in this scenario in dollars.

c. Assume now that it is not possible to sell more than 600 units of a particular product per month. Calculate the quantities of product A1, B1 and C1 that should be produced if machine hours are limited to 500 hours per month.

d. What is the maximum amount SRK Ltd. would be willing to pay for another 100 machine hours?

Reference no: EM132817668

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What is the maximum amount SRK Ltd would be willing to pay

Reference no: EM132817668

Reference no: EM132817668

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