Question

Benkhadour Co. manufactures four different products. Because the quality of its products is high, the demand for them is greater than the company can satisfy.

Based on the inquiries made by current and potential customers, you have estimated the following for the coming year:

Product	Estimated Demand in Units	Selling Price per Unit	Direct Materials Cost per Unit	Direct Labour Cost per Unit
A	8,000	$  50	$  5	$  5
B	24,000	60	10	9
C	20,000	150	25	30
D	30,000	100	15	20

The following information is also available:

• 1.The direct labour rate is $15 per hour and the factory has a capacity of 80,000 hours. For the next year, Benkhadour is unable to expand this capacity.
• 2.Benkhadour is unwilling to increase its selling prices.
• 3.Apart from direct materials and direct labour, the only other variable expense is variable overhead. The variable overhead is 50% of the direct labour cost.
• 4.Fixed manufacturing overhead is estimated to be $1 million for the coming year. Fixed marketing and administrative expenses are estimated to be $750,000 for the coming year.

Instructions

Determine which products and how many units of each Benkhadour should produce in the coming year in order to maximize its operating income.

****** Produce 11,467 units of C *******

Please show all calculations. Would like a new explanation, already read the available answers.

Answer 1