Profit Maximization Essay Example for Free

do good Maximization EssayDetailsPixie( per unit)Elf( per unit)Queen( per unit)King( per unit)Selling impairment11198122326 variable quantity beDirect Materials25352225Direct advertise5555Variable Overheads1718151647584246Contribution644080280Type 1 Labor86Type 2 Labor1010Type 3 Labor525Contribution per type 1 craunch86.67Contribution per type 2 labor828Contribution per type 3 labor1611.2DetailsrankType 1Type 2Type 3Pixie1N/AN/AElf2N/AN/AQueensN/A21KingN/A12Planned exertion 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 Costs82,000216,000298,000Contribution29,000110,000139,000Fixed Costs15,000Net Profit124,000Direct Labor KingType 2 = 1,000 units x 10 h ours 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, profit 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 lead 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 solo 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 spill leaders. These are products, they generate low pay and sometimes-even losses, but are key 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 retail ers of computer equipment. However, they attract clients, who may eventually purchase hardware products that generated greater income.ReferencesDrury C. (1996). Management and Cost Accounting. Fourth Edition. new-fashioned York International Thomson Business Press.Kotler P. Armstrong A. (2004). Principles of Marketing. Tenth Edition. New Jersey Pearson Education Incorporation.