Limiting factory

[K_Z]

hi i am havig very terbal time. i aswer the question in the book but i ca not answer the question in the paper

Data

TPL makes two industrial paints, IP46 and IP52 that use the same pigment - which is temporarily in short supply. The maximum amount of this pigment that can be obtained next quarter is 2,300 kgs.

The following forecast information is available about these two paints for next quarter:

Paint type IP46 IP52
Contribution per thousand litres (£) 800 840

Demand (forecast sales in thousand litres) 160 420
Kg of pigment required per thousand litres 8 7

Total fixed costs for both paints £72,000

Note:
The company has binding contracts to supply 25,000 litres of IP46 next quarter (included in the demand figure above). These contracts must be fulfilled regardless of their profitability.

Task 2.3 (20 minutes)

Complete the table below to recommend how many litres of each type of paint should be made to maximise profits during the quarter. (You will need to write in the descriptions, where these are not shown, as appropriate).

Paint type IP46 IP52 Total
Contribution per thousand litres (£)
Kg of pigment required per thousand litres
Contribution per kg of pigment (£)
Ranking
.

.

.
Thousand litres of paint to make
Total contribution earned (£)
Less: fixed costs (£)
Profit/loss made (£)

 

[mike99]

Paint type IP46 IP52 Total
CM/1000l 800 840 1640
Kg Pigment 8 7 15
CM/Kg 100 120 220
Ranking 2 1

Therefore, we will reduce the production of IP46, as it produces a lower CM/unit of the limited factor (pigment).

Required pigment for IP46: 25*8 = 200kgs
Fulfill IP52 demand: 420*7 = 2940kgs
But we only have (2300 - 200) = 2100 kgs of pigment leftover for IP52.
Therefore, can only produce 2100/7 = 300,000l of IP52

Thousand litres of paint to make: 300,000 + 25,000 = 325,000
Total contribution earned = (800*25) + (840*300) = 272,000
Less: fixed costs = (72,000)
Profit/loss made = 200,000