Question

Q.2 As Engineering Manager in Your Company Ltd. you are responsible for maximising the profit from four product lines W, X, Y and Z. You have been provided with the following information Direct materials (kg) 75 90 85 70 Direct labour (h) 3.5 Fabrication Assembly Packaging 4.5 8 3.5 4.5 9.5 4 Selling price per unit (£) 1400 2350 3000 1200 300 450 Max. sales for the period (in units) 400 280 280 Budgeted production (in units) 300 270 270 Additional information is also provided There are no closing stocks 2. Material costs are estimated at £8.00/kg 3. The labour rate for the assembly and packaging operations is £16.00/h and £22/h for the fabrication process The skilled labour required for the fabrication is in short supply although there is just enough to meet the current budgeted production 4. Required (a) 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 (8 marks) (b) (2 marks) (c) be obtained. Explain your rationale (10 marks)

Answer 1

The product which giving highest contribution per unit of limiting factor should be first produced up to its maximum sale units as we got product Y should be first produced with fabrication operation.

Thank you. I hope you understand.