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Question A company produces two products, Alpha and Beta, details of which are as follows:...

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Accounting

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A company produces two products, Alpha and Beta, details of which are as follows:

Alpha Beta

Material X at R5 / kg 10 20

Labour at R2 / hour 20 10

Variable machine costs at R3 / hour 12 9

Variable costs 6 6

48 45

Selling price 60 60

Demand 1 000 1 000

Material is restricted, owing to import restrictions, to 5 000kg monthly.

The machine hour capacity of the company is 6 000 hours monthly.

There are no opening or closing of stocks.

You are required to show, with reasons:

4.1 The production plan the company should follow to maximise profits, and the contribution so arising. (6)

4.2 The minimum selling price the company could quote on a special order which required the under mentioned costs: (7)

Material X R1 000

Labour R1 000

Machine time R150

Variable costs R400

4.3 If Alpha and Beta can be purchased at a price of R52 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits.

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