Optimal production

MA – L2 – Q55 – Decision making techniques

Provide the optimal production plan for Harmony Company Ltd with limited labour hours for three products.

Question

Harmony Company Ltd is preparing for next season’s operations. The company has provided the following information relating to its three products:

	TA	GB	DC
	GH¢	GH¢	GH¢
Selling price	18.5	16.2	12.6
Material cost	8.75	10.5	3.5
Labour cost	7.7	4.4	7.7

Labour hours per unit:

	TA	GB	DC
Labour hours	3.5	2.0	3.5

Annual Demand:
2,150 units (TA), 3,235 units (GB), 1,556 units (DC)

The company can only make available a total of 18,560 hours in the short run.

Required:
(a) Provide the optimal production plan for Harmony Ltd for the ensuing period.

(b) What is the total incremental benefit of producing DC instead of GB, assuming available resources can only meet demand of DC?

Answer

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Tags: contribution per hour, decision making, Labour Hours, Optimal production, production plan, Resource Allocation
Level: Level 2

Topic: Decision making techniques

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

Question

Ouluto Limited (OUL) is engaged in the manufacture and sale of three products viz. WBA, QPR and SC. The following information is available from OUL’s records for the month of February 20X9:

	WBA	QPR	SC
Sales price per unit (GH₵)	2,300	1,550	2,000
Material cost per Kg. (GH₵)	250	250	250
Labour time per unit (Minutes)	20	30	45
Machine time per unit (Hours)	4	2.5	3
Net weight per unit of finished product (Kg.)	6	4	5
Yield (%)	90	95	92
Estimated demand (Units)	10,000	20,000	9,000

Each worker is paid monthly wages of GH₵15,000 and works a total of 200 hours per month. OUL’s total overheads are estimated at 20% of the material cost.
Fixed overheads are estimated at GH₵5 million per month and are allocated to each product on the basis of machine hours. 100,000 machine hours are estimated to be available in February 20X9.
Required:
Based on optimum product mix, compute OUL’s net profit for the month of February 20X9.

Answer

Find Related Questions by Tags, levels, etc.

Tags: contribution margin, fixed costs, Machine Hours, Manufacturing, Net profit, Optimal production, Product mix, Profit Maximization, Resource Allocation, variable costs
Level: Level 2

Topic: Decision making techniques

Tag (SQ): Optimal production

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MA – L2 – Q55 – Decision making techniques

Provide the optimal production plan for Harmony Company Ltd with limited labour hours for three products.

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

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MA – L2 – Q55 – Decision making techniques

Provide the optimal production plan for Harmony Company Ltd with limited labour hours for three products.

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MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

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