Question

UUU Question 1 cts (giving a Explain the term "limiting factor" in a production strategy and give four (4) examples. b. GRASAG Ltd produces four (4) different types of kitchen cabinets. The Production red in thei Manager is preparing its production mix for the year and has presented the following Type of Cabinet: s faith 10 Selling Price/Unit (GHC) 420 360 300 240 Material Price/kg GHC10 Labour Hour Rate GHC5/hour Materials (kg) 8 10 12 Labour Hours 8 10 6 4 Maximum Demand (units) 15,000 12,000 20.000 20,000 Assume that: Fixed Cost per annum is GHC280,000, materials are limited to 596,000 kgs; and labour Hours are limited to 480,000 Hours nd.

a)calculate the breakeven point of units for each product
b)assuming, materials is a limiting factor in the period, advise management on the most appropriate mix
c)assuming labour is a limiting factor in the period, advise management on the most appropriate mix
d)which product should the company office concentrate more of its materials and labour on and why?
e)compute the total contribution the company would earn from the production mix determined in (b) above

Answer 1

Answer B,C,D

F с Particulars/Products Selling Price Material Labour 420 100 360 80 50 300 100 300 40 230 Material limiting factor 280 101 28 8 10 29 Contribution Limiting Factor - Material /unit Contribution/LF Rank based of material limiting factor Maximum Demand Material Required Product mix 11 20000 240000 12500 15000 12000 20000 150000 96000 200000 15000 12000 20000 Total Material Available = 596,000 kg Material used for J,F,C= 446,000 Remaining material is available for p

Labour Limiting Factor Particulars/Products Contribution Limiting Factor - Labour/unit Contribution/LF Rank based of Labour limiting factor Maximum Demand Labour Hour Required Product mix 15000 12000 20000 20000 120000 120000 120000 80000 15000 12000 20000 20000 Total labour hour available is more than the actual labour hour used for product mix which is 440,000 hours

D) Company office should concentrate on Product ), since it provides higher contribution as compared to the others Product contribution = GHC 280, higher than other Products.