Qwestion? You have beem engaged wih Acme amauring Company to prvie vice on e aso

Question

Qwestion? You have beem engaged wih Acme amauring Company to prvie vice on e asost profiialile preeduction plan for the commpany The contrany "nake" three products X, Y "nd Z and the appropriate data are foss Cost per unit ,00 45 ireet Labour Cost 45.00 rocess A Process B Process C 30.00 18.00 9.00 20.00 20.00 142.00 190.00 36.00 Variable Overhead Cost Fixed Overhead Cost Total Cost 18.00 30.00 20.00 134.00 150.00 50.00 20.00 211.00 260.00 Selling Price Budgeted volume per annum 4,000 There is a constraint on the direct labour hours for Process A which is limited to 160,0o0 6,000 5,000 direct labour hours. The direct labour rate per hour for Process A is RM3.00. x, 2000 Y and 2000 Z which The sales director has already accepted an order for 1000 above. must be supplied. These quantities are included in the market demand estimates Required: Calculate the shortfall of Process A Direct Labour hours for the year 2018. Determine the production units of each product in order to maximise profit. Calculate the maximum profit based on your answer obtained in (b) above. (a) 5 marks) ) (10 marks) 5 marks) (Total: 20 marks) -END OF THE QUESTION

Explanation / Answer

(a) Calculation of short fall of Process A

Total labour hour required = 48000+ 50000 + 90000 = 188000 hours

Available DL for process A = 160000

Short fall = 188000 - 160000 = 28000 hours

(b) we have a constrant of labour hour for process 'A' , now we have to calculate contribution per unit for process 'A

We have to produce firstly product y , producy Z then X because y providing higher contribution

Due to already accepted the order of 1000 X , 2000 Y, 2000 Z and we have limited process A labour is 160000 hour

X 1000 12 = 12000

Y 2000 10 = 20000

Z 2000 15 = 30000

total = 62000

Balance hour 160000 - 62000 = 98000 hours

first utilise for balance 3000 units of Y = 3000* 10 = 30000

Balance hour after Y = 98000 - 30000 hours = 68000 hours

now utilise for balance 4000 units of Z = 4000* 15 = 60000

Balance hour  after Z = 68000 - 60000 hours = 8000 hours

now utilise for X = 8000hours/ 12 hours per unit =666 units

total qty to be produced

X 10000 + 666 = 1666

Y 2000 + 3000 = 5000

Z 2000 + 4000 = 6000

X Y Z Cost of process A 36 30 45 Labour rate per hour 3 3 3 Labour hour required per units a/b 12 10 15 units required 4000 5000 6000 minimum direct labour hour required c*d 48000 50000 90000

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