PH Ltd company produces and sells four products: A, B, C and D. The estimated...
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PH Ltd company produces and sells four products: A, B, C and D. The estimated demand for 2021 for the four products, their selling prices and variable costs are as follows: Particulars A B C D Annual demand (units) 125,000 190,000 175,000 105,000 Selling price $24.88 $29.68 $56.08 $48.88 Direct material cost per unit $9.08 $12.20 $29.48 $23.96 Direct labour cost per unit $5.08 $5.08 $7.72 $7.36 Variable overheads per unit $1.50 $1.50 $2.50 $2.25 The variable overheads are absorbed on a machine hour basis at a rate of $1.25 per machine hour. Fixed overheads amount to $4,486,000 per annum. The production capacity is 875,000 machine hours per annum. Products A, B and C can be bought from external suppliers at $21.36 per unit, $24 per unit and $48 per unit respectively.
Required (a) Determine the contribution per unit for each products A, B, C and D. (b) Determine if there is any limiting factor which would limit the annual production for PH Ltd? Show necessary calculations. (c) Determine the best product mix that PH Ltd must produce in house for the year 2021 and the resulting optimal profit.
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