[Solved] Next year’s forecasted trading results for Caribee Ltd, a small company manufacturing three different types of product, are shown below

(a) Next year’s forecasted trading results for Caribee Ltd, a small company manufacturing three different types of product, are shown below:

Required:

Explain how the company’s forecasted profits would be affected if product C were discontinued. It should be assumed that sales of the remaining products would not be affected; any other assumptions made should be included with your explanation (4 marks)

(b) The production director of Caribee Ltd has just been informed that next year’s supplies of a material used in the manufacture of each of the three products will be restricted to 92,000kg; no substitute material is available and the estimated consumption of this restricted material, per product, is:

The sales director estimates that the maximum demand for each product is that which is shown in the original forecast in (a) above. Assume that inventories of materials, work in progress or finished goods cannot be carried.

Required:

Calculate the optimum quantities of products A, B and C which should be manufactured next year in order to maximise company profits.

Expert Answer

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Answer to Next year’s forecasted trading results for Caribee Ltd, a small company manufacturing three different types of product, are shown below…..