Elegant Enterprises plc is currently operating at 80% of its machine capacity in the manufacture of three different types of chair. The following information for each product is available for the year ended Year 1

Elegant Enterprises plc is currently operating at 80% of its machine capacity to manufacture three different types of chair.

For the year that just finished, Year 1, the following details are available for each product.
Unit Specifics Simple Delux Extra Deluxe
Pricing: £150, £200, and $260
Materials £60 £80 £110, labor £40 £60 £80, and variable overheads?? are examples of variable costs.
Machine Time 2 hours, 5 hours, 5 hours Produced Each product is assessed 5000 5500 6500 Variable Overheads at a rate of £5 per machine hour.
Currently, fixed costs total £450,000.
Calculate the following using the data above: (i) the total number of machine hours that Elegant Enterprises plc will utilize in Year 1; and (ii) the total profit that Elegant Enterprises plc will make at the current production level.
Elegant Enterprises plc will operate at maximum machine efficiency in Year 2, and it is predicted that demand for each of the three goods will be as follows:
6,500 basic units
7,500 Delux units
8,000 Super Delux units
The increase in fixed costs is 20%.
Calculate (i) the number of machine hours available at full capacity; (ii) the amount of each product that must be produced at full capacity to maximize earnings; and (iii) the Total Profit using the data from Year 2.

Elegant Enterprises plc intends to launch a new product called Ultimate Delux at the beginning of Year 3 of the plan. The business will spend money on new equipment, boosting overall machine capacity by 20%. A further £45,000 will be added to fixed expenses. The recovery rate for variable overheads will be the same as it was for the preceding two years. The details for each unit are as follows.
$300 asking price
Cost of materials: £175
$60 for labor
five machine hours
Demand will be 5,500 units for the new product, Ultimate Delux, while it won’t change for the other three items from Year 2 to Year 3.
(c) Determine the highest profit Elegant Enterprises might possibly make in Year 3 and recommend to the business whether or not it should launch the new product.
(d) A special order of 2,000 Ultimate Delux units at a discounted rate of £280 each is being considered for Year 4. The factory will continue operating at full capacity, and the level of demand for the company’s goods will not change. All other expenses and costs stay the same. Determine the new profit and suggest whether or not to approve the unique order.
(e) Define the concept of opportunity cost.


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