Alex Limited manufactures 3 products, A, B and C. Product A generates a contribution of £20, product B a contribution of £30 and product C a contribution of £40. The company is currently anticipating a shortage of the necessary grade of skilled labour over the next month with the supply of this labour limited to a maximum of 4,000 hours. Product A uses 2 hours of this skilled labour per unit of production, product B uses 4 hours and product C uses 5 hours. The demand for the next month for each product is as follows: Product A: 500 units
Product B: 600 units
Product C: 700 units
What is the profit maximizing production schedule that Alex Limited should follow for the next month?

Question

Quizplus · Accepted Answer

The profit-maximizing production schedule should prioritize products with the highest contribution per hour of skilled labor. Product C has the highest contribution per hour (£40/5 = £8), followed by Product A (£20/2 = £10), and then Product B (£30/4 = £7.5). Therefore, the company should produce the maximum demand for Product A and C, using up the available labor hours efficiently.

Alex Limited Manufactures 3 Products, A, B and C