production plan and its resultant profit

production plan and its resultant profit

XY Ltd is manufacturing three household products A, B and C and selling them in a competitive market. Details of the current demand, selling price and cost structure are given as follows:
A
B
C
Expected Demand (units)
10,000
12,000
20,000
Selling Price per unit (Rs.)
20
16
10
Variable Cost per unit (Rs.):
Direct Materials (Rs. 10/kg)
6
4
2
Direct Labour (Rs. 15/hr.)
3
3
1.50
Variable Overheads
2
1
1
Fixed Overheads per unit (Rs.)
5
4
2
The company is frequently affected by an acute scarcity of raw material and high labour turnover. During the next period it is expected to have one of the following situations:
Raw materials available will be only 12,100 kg.
Direct labour hours available will be only 5,000 hrs.
It may be possible to increase the sales of any one product by 25% without any additional Fixed Costs, but by spending Rs. 20,000 on advertisement. There will be no shortage of materials or labour.
Suggest the best production plan in each case and the resultant profit that the company would earn according to your suggestion.

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