Profit Maximization Essay Example for Free

Profit maximization EssayDetailsPixie( per unit) hob( per unit) butt( per unit)King( per unit)Selling Price11198122326 shifting costDirect Materials25352225Direct Labor5555Variable Overheads1718151647584246Contribution644080280Type 1 Labor86Type 2 Labor1010Type 3 Labor525Contribution per lawsuit 1 labor86.67Contribution per type 2 labor828Contribution per type 3 labor1611.2DetailsRankingType 1Type 2Type 3Pixie1N/AN/AElf2N/AN/AQueensN/A21KingN/A12Planned Production ScheduleElf = no production (no hours of type 1 labor available)King = 1,000 units (full production)Queen = no production (no hours of type 3 labor available)Profit StatementPixie( per unit)King( per unit)Total( per unit)Sales111,000326,000437,000Variable CostsDirect Materials25,00025,00050,000Direct Labor40,000175,000215,000Variable Overhead17,00016,00033,000Total Variable Costs82,000216,000298,000Contribution29,000110,000139,000 unyielding Costs15,000Net Profit124,000Direct Labor KingType 2 = 1,000 units x 10 hours per unit x 5 = 50,000Type 3 = 1,000 units x 25 hours per unit x 5 = 125,000Total Direct Labor Cost 175,000b) Under instances of limiting factors, like labor in this case, pay maximization is determined by deducing the production that will provide the highest contribution per limiting factor (Drury C. 1996, p 265). This is based on the premise that optimum utilization of resources will stem from producing the products that provide the highest profit in terms of the limited resource used. The main limitation of the aforementioned approach is that it solely considers financial factors. In a business environment, there are qualitative features, which also significantly affect the organization. For instance, products Elf and Queen might be loss leaders. These are products, they generate low profits and sometimes-even losses, but are key fruit variables in boosting the sales of other products (Kotler P. et al 2004, p 378). For example, blank CDs and DVDs generated few profits to retai lers of computer equipment. However, they seduce clients, who may eventually purchase hardware products that generated greater income.ReferencesDrury C. (1996). Management and Cost Accounting. Fourth Edition. New York worldwide Thomson Business Press.Kotler P. Armstrong A. (2004). Principles of Marketing. Tenth Edition. New Jersey Pearson Education Incorporation.