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The Engineering Manager in ABC Ltd is responsible for maximising the profit from three product lines X, Y ,Z. He/she has been provided with the following information:

(b) The Engineering Manager in ABC Ltd is responsible for maximising the profit from three product lines X, Y and Z. He/she has been provided with the following information 85 120 Direct materials (E) Direct labour (hrs) Fabrication Assembly Finishing Selling price per unit (£) 100 4 2 3.75 550 210 3.5 2 3.5 480 220 3.75 1.5 625 Budgeted production (in units) 180 Additional information is also provided There are no closing stocks The maximum sales achievable for each product in the period is 230 units The labour rate for fabrication and finishing is £13.50/hr. The labour rate for assembly work is £12.00/hr The skilled labour required for the assembly process is in short supply although there is just enough to meet the current budgeted production Required (i) Prepare a statement showing the contribution from each product based on the budgeted production Calculate the contribution per unit of limiting factor Prepare a statement showing the maximum total contribution that can (6 marks) (ii) (2 marks) (iii) be obtained. Explain your rationale (6 marks)

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Home nert Page Layout Formulas Data Review View dd-Ins E AutoSum Cut Wrap Text Sort &Find & Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ 2 ClearFe Select Edting ta copy ▼ в 1 프· ー· 鱼, Δ. :r-ㄧ 逻锂函Merge & Center. $, % , 弼,8 C Format Painter Cells Number Alignment Clipboard し14 3 NOTE 4 TOTAL LABOUR HOURS AVAILABLE IN ASSEMBLY DEPARTMENT PRODUCT RATE BUDGETED PRODUCTION TOTAL LABOUR HOURS 210 220 180 420 440 270 9 1.5 10 TOTAL LABOUR HOURS1130 12 13 14 15 16 17 18 19 CRDIT POLICY ,KE, RATIO CCA 1 CVP MULTIPLE GROWTH RR-NR-BOND . .. loan 0 | MDURATION 04-01-2019Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text ta copy ▼ в 1 프· ー· 鱼, Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ Sort &Find & 2 ClearFe Select Edting Format Painter Clipboard Alignment Number Cells 21 12 (i) 13 14 15 P 16 A 17 B 18 C 19 20 D 21 22 E 23 24 CONT 25 26 (P* CONT) TOTAL CONTRIBUTION 27 28 29 STATEMENT SHOWING CONTRIBUTION BASED ON BUDGETED PRODUCTION BUDGETED PRODUCTION SELLING PRICE ESS DIRECT MATERIAL LESS: FABRICATION LABOUR (RATE X NO OF HOURS) LESS: ASSEMBLY LABOUR 180 625 120 50.625 13.5*4[13.5*3.5 [13.5*3.75] 18 122] 122121.5] 54 [13.5 3.75] [13.5 3.5[13.5*4] 276.5 382.375 210 550 100 54 220 480 85 47.25 24 24 LESS: FINISHING LABOUR 50.625 47.25 CONTRIBUTION PER UNIT 321.375 (A-B-C-D-E) 67488.75 60830 68827.5 | MDURATION MULTIPLE GROWTH RR-NR-BOND . .. loan 0 CRDIT POLİCY KE RATIO CCA | CVP 04-01-2019Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum Wrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Alignment Number Cells Edting 28 (ii) 29 30 31 32 CONTRIBUTION PER UNIT OF LIMITING FACTOR CONTRIBUTION PER UNIT ASSEMBLY LABOUR HOURS CONTRIBUTION PER UNIT OF LIMITING FACTOR 321.375 276.5 382.375 M 1.5 N 160.6875 138.25 191.1875 M/N 34 35 36 (ii) 37 38 39 40 41 42 43 RANK AS PER RANK, FIRST Z, THEN X AND THEN Y SHOULD BE PRODUCED FOR MAXIMUM PROFIT (HIGHEST CONTRIBUTION PER UNIT OF LIMITING FACTOR IS RANKED 1 AND SO ON) TOTAL LABOUR HOURS AVAILABLE AS PER NOTE ESS: LABOUR HOURS USED BY Z ESS: LABOUR HOURS USED BY X LABOUR HOURS LEFT 1130 345 460 325 230 X 1.5 230 X 2 1130 345-460 SO UNITS POSSIBLE OF Y = 325/2 162 X 2 162 (LABOUR HOURS LEFT/HOURS REQUIRED PER UNIT) 45 46 | MDURATION MULTIPLE GROWTH RR-NR-BOND . .. loan 0 CRDIT POLİCY KE RATIO CCA | CVP 04-01-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy ▼ E AutoSum ー E ゴWrap Text Sort &Find & B า 프 . Ej-., Δ. : r_一 逻锂函Merge & Center. $, % , 弼,8 conditional Format . Cell Insert Delete Format Formatting as Table Styles2 Clear Format Painter Cells Edting Number Alignment Clipboard 46 47 48 49 50 51 52 53 54 321.375 230 276.5 162 382.375 230 CONTRIBUTION PER UNIT MAXIMUM PRODUCTION TOTAL CONTRIBUTION7391625 44793 87946.25 206655.50 TOTAL CONTRIBUTION BASED 67488.75 60830.00 68827.50 197146.25 ON BUDGETED PRODUCTION SO PROFIT HAS INCREASED FROM 197146.25 TO 206655.5 56 57 58 RATIONALE WE HAVE RANKED THE PRODUCTS BASED ON HIGHEST CONTRIBUTION ACHIEVED PER UNITS OF LIMITING FACTOR 59 60 61 62 63 64 THIS INDICATES WHERE WE GOT MORE PER UNIT PROFIT SO WE PRODUCE ACCORDINGLY. SO FIRST Z, THEN X AND THEN IF ANY LABOUR HOURS LEFT FOR Y CRDIT POLICY KE . RATIO . CCA 1 CVP | MDURATION MULTIPLE GROWTH RR-NR-BOND . .. loan 0 04-01-2019

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