An organisation manufactures plastic-covered steel fencing in two qualities: standard and heavy gauge. Both products pass through the same processes involving steel forming and plastic bonding.
The standard gauge sells at $15 a roll and the heavy gauge at $20 a roll. There is an unlimited market for the standard gauge but outlets for the heavy gauge are limited to 13,000 rolls a year. The factory operations of each process are limited to 2,400 hours a year. Other relevant data is given below.
Variable costs per roll
|
|
Direct material
|
Direct wages
|
Direct expense
|
|
Standard
|
$ 5
|
$ 7
|
$ 1
|
|
Heavy
|
7
|
8
|
2
|
|
Processing hours per 100 rolls
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|
Steel
|
Plastic
|
|
Standard
|
|
forming Hours 6
|
bondingHours 4
|
|
Heavy
|
|
8
|
12
|
|
Required
|
|
|
|
Calculate the allocation of resources and hence the production mix which will maximise total contribution.