- 8 Marks
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?
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