Help with solution please

Moderator: Bluewednesday

Help with solution please

Postby KitCat » Tue Sep 11, 2012 6:24 pm

I have the following scenario:

A company produces 3 products, A, B & C. We are told that labour is in short supply and are given the following details for each product.

Selling Price
Materials
Labour
Fixed overheads
Profit
Demand

We are told that the company has 5 employees who work 35 hrs per week and it is a 50wk year and labour is paid $5 per hr.

We are asked for the optimal production plan for the year, if no overtime is worked.

As we are talking limiting factors do I then rank the products on contribution, ie Selling price less materials & labour. and if labour is the limiting factor then the number of hours for the optimal plan for the year would be 5 x 35 x 50 = 8,750 hrs.

That being the case, we are then told that we can recruit extra staff at $7 per hr and we need to say whether or not we should recruit 2 extra members of staff for the forthcoming week and the impact on profit it would have.

Now this is the bit I am not sure of, as my optimal plan was for the year and they want to know whether to recruit 2 extra staff for a week. I know it relates to shadow prices but I can't seem to get my head into gear.

Can anyone help?
Thanks
KitCat
 
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