Question 1
a) Optimal Production Plan to Maximise Profits (20 marks)
The initial deciding in order to define the output plan is to compute every product’s contribution line per unit and limiting factor (machine hours) production.
Product Contributions
Product A: Selling Price = £29, and Fixed Costs is £4, = £3= £15 per unit
Product B: £32-=(£6 + £3 + £6)=£17/unit.
Product C: In order to calculate the price of each unit, let’s break it down as follows: £8 for materials + £12 for labour + £6 for overheads = £29 per unit.
Product D: £48-(£7+ £12+ £6) = £23 per unit.
b) Net Benefit from Overtime (10 marks)
Assume the overtime is taken to mark full demand, then there will arise a cost of labour and overheads by 50%. On the contrary, all the demands limited can really be met at the peak. Revised contributions after 50% labour and variable overhead increase: Revised contributions after 50% labour and variable overhead
c) Benefits and Limitations of Outsourcing
d) Memo to Managing Director (5 marks)
