Question

Glass Product Limited (GPL) is a manufacturer specializing in glass products . The company has been in operation for ten years and during that time has built up a loyal and expanding customer base.GPL Limited has three signature lines, Trophies, Glasses and Mirrors all produced from Italian imported sand.. Successful marketing and sales of these products has resulted in the company exceeding full capacity at its current manufacturing base in Habour Road. Consequently, the directors are considering expanding production capacity over the next few years and are examining a number of possibilities. However, for the current year the company has a total of 15,000 Furnace hours and 4,000 direct labour hours available for production at its Harbour Road manufacturing base. Production and sales details relating to the signature Products are shown below:

   Trophies   Glasses   Mirrors
Direct material (linen) @$20 per meter   1.5 m   1.25 m   2.5 m
Direct labor@ $16 per hour   0.5 hrs.   0.25 hrs   0.75 hrs
Variable overhead @ 125% of direct labor cost          
Furnace hours required   3 hrs   2 hrs   2.5 hrs
Sales demand units (annual)   3,500   1,400   1,800
Selling price per unit   $ 60.00   $90.00   $125.00
           
Additional Information
Budgeted fixed manufacturing overheads per month $ 100,200
Budgeted selling and administrative cost per month $46,500

Required.

1.   Based on the information provided, state whether GPL has sufficient production capacity to satisfy sales demand for the coming year. (provide computations)                        
2.   Compute the optimal production plan for GPL for the current year, clearly showing total profit expected.   

Answer 1

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