Question

Hachine hours were used and ou uiculate the amount of over- or under V Question 5 (10 marks) heads incurred were $15,160. of under-applied overhead for the period? Keyline Ltd. Makes three products, budgete ucts, budgeted details of which are given below: Selling price Machine hours per unit Variable cost per unit $160 $200 $180 2 4 2 $60 $80 $90 Fixed cost $200,000 Expected sales (units) 100 500 400 Machine time available for the period is restricted to 2,000 hours. 1. Compute contribution per machine hour for each product (5 marks). 2. Compute the optimum profit for the Company (5 marks).

Answer 1

Maximum Machine Hours Available = 2000 Hours Hours Required to meet the Demand of the Product Total S.No Particulars х z 1 Machine Hours per unit 2Expected Sales in Units 3 Total Machine Hours Required 2 4 2 400 100 500 3000 200 2000 800 Contribution Per Machine Hour Particulars S.No х Z 1Selling Price 2Less: Variable Cost S160 $200 $180 -S90 -S60 -S80 3 Contribution (1) - (2) 4 Machine Hours per unit $100 $120 $90 4 2 5 Contribution per Machine Hour (3) - (4) Order of Production $50 S30 S45 I III II Order of production is ranked based on Comtribution per Machine Hour because Machine hours is the restricted supply. In order to earn more profit, products shall be manufactured and sold in thr order of production

S.No Product Hours per unit Units Total hours Cum. Total hours 2. 1 100 200 200 21 2 Z 400 800 1000 3 250 1000 2000

Optimum Profit of the Company S.No Particulars Q Z 1Selling Price 2Less: Variable Cost 3 Contribution (1) - (2) 4Expected Sales in Units 5Total Contribution 6 Total Contribution 7 Less: Fixed Costs 8Profit/(Loss) $180 S160 $200 -S60 -S80 -S90 $100 $120 $90 100 250 400 S10,000 S30,000 S36,000 $76,000 $2,00,000 -S1,24,000 Loss for the Company S 124,000