Question:

Vinak Ltd., which produces three products provides you the following data for 2008-2009.

                                                                                           Products
                                                                            A                 B                     C
Selling price per unit (£.)                                    100              75                    50
Profit volume ratio (%)                                        10               20                    40
Maximum sales potential (units)                      40,000        25,000             10,000
Raw material content as percentage
of variable costs (%)                                          50                 50                    50

The fixed expenses are estimated at £ 680,000. The company uses a single raw material in all the three products. Raw material is in short supply and the company has a quota for the supply of raw materials of the value of £ 1,800,000 for the year 2008-2009 for the manufacture of its products to meet its sales demand.

Required:

i) set a product mix which will give a maximum overall profit keeping the short supply of raw materials in view.

(ii) compute the maximum profit.