- 15 Marks
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.
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