Solved: G Limited manufacturers of superior garden

ornaments is preparing its

G Limited manufacturers of superior garden ornaments is preparing its

G Limited, manufacturers of superior garden ornaments, is preparing its production budget for
the coming period. The company makes four types of ornament, the data for which are as
follows:

Fixed overhead amounts to £15 000 per period.

Each type of labour is paid £5 per hour but because of the skills involved, an employee of one
type cannot be used for work normally done by another type.

The maximum hours available in each type are:

Type 1........................... 8 000 hours

Type 2........................... 20 000 hours

Type 3........................... 25 000 hours

The marketing department judges that, at the present selling prices, the demand for the
products is likely to be:

Pixie ............................. Unlimited demand

Elf............................... Unlimited demand

Queen........................ ... 1500 unit

King.............................. 1000 units

(a) To calculate the product mix that will maximize profit, and the amount of the profit;

(b) To determine whether it would be worthwhile paying Type 1 Labour for overtime working at
time and a half and, if so, to calculate the extra profit for each 1000 hours of overtime;

(c) To comment on the principles used to find the optimum product mix in part (a), pointing out
any possible limitations;

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 G Limited manufacturers of superior garden ornaments is preparing its

ANSWER
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