The Board of Directors of KE Ltd. manufacturers of three products A, B and C have...

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The Board of Directors of KE Ltd. manufacturers of three products A, B and C have asked for advice on the production mixture of the company. (a) You are required to present a statement to advice the directors of the most profitable mixture of the products to be made and sold. The statement should show: (i) The profit expected on the current budgeted production, and (ii) The profit which could be expected if the most profitable mixture was produced. (b) You are also required to direct the director's attention to any problem which is likely to arise if the mixture in (a) (ii) above were to be produced. The following information is given:- Data for standard Costs, per unit: Direct material (2) Variable overhead (R) Direct Labour: Department 1 2 3 Product A Rate per 0.5 1.0 0.5 the Data from current budget production in thousands of units per year: Selling price per unit: (*) 10 3 Hours 28 5 16 10 50 Product B Fixed cost per year 2,00,000 Maximum sales forecast by the Sales director for the year 2013 in thousands of units Hours 16 6 8 5 68 30 2 12 Product C Hours 30 10 30 6 90 7 20 5 9 However the type of labour required by Dept 2 is in short supply and it is not possible to increase the manpower of this dept, beyond its present level. The Board of Directors of KE Ltd. manufacturers of three products A, B and C have asked for advice on the production mixture of the company. (a) You are required to present a statement to advice the directors of the most profitable mixture of the products to be made and sold. The statement should show: (i) The profit expected on the current budgeted production, and (ii) The profit which could be expected if the most profitable mixture was produced. (b) You are also required to direct the director's attention to any problem which is likely to arise if the mixture in (a) (ii) above were to be produced. The following information is given:- Data for standard Costs, per unit: Direct material (2) Variable overhead (R) Direct Labour: Department 1 2 3 Product A Rate per 0.5 1.0 0.5 the Data from current budget production in thousands of units per year: Selling price per unit: (*) 10 3 Hours 28 5 16 10 50 Product B Fixed cost per year 2,00,000 Maximum sales forecast by the Sales director for the year 2013 in thousands of units Hours 16 6 8 5 68 30 2 12 Product C Hours 30 10 30 6 90 7 20 5 9 However the type of labour required by Dept 2 is in short supply and it is not possible to increase the manpower of this dept, beyond its present level.

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From the provided image the Board of Directors of KE Ltd has asked for advice on the production mixture of three products A B and C To provide them with the advice they have asked for we need to calcu... View the full answer