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THS produces two products from different combinations of the same resources. Details of the products are shown below:
A company has budgeted to produce 5,000 units of Product B per month. The opening and closing inventories of Product B for next month are budgeted to be 400 units and 900 units respectively. The budgeted selling price and variable production costs per unit for Product B are as follows:
The labour requirement for a special contract is 250 skilled labour hours paid at $10 per hour and 750 semi-skilled labour hours paid at $8 per hour.
At present, skilled labour is fully utilised on other contracts which generate a $12 contribution per hour, after charging labour costs. Additional skilled labour is unavailable in the short term.
There is a surplus of 1,200 semi-skilled hours over the period of the contract but the firm has a policy of no redundancies.
The relevant cost of labour for the special contract is:
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