BBQ Ltd manufactures two types of barbecue – the Deluxe BBQ and the Standard BBQ. Both undergo similar production processes and use similar materials and types of labour. However, a shortage of direct labour has been identified and this is limiting the company’s ability to produce the required number of barbecues for the year ending 31 May 2002. Labour capacity is limited to 235,000 labour hours for the year ending 31 May 2002 and this is insufficient to meet total sales demand. BBQ Ltd has stated that the standard selling price and standard prime cost for each barbecue for the forthcoming year are as follows:

It has been company policy to absorb production overheads on a labour hour basis. The budgeted information for the year ending 31 May 2002 is as follows:Fixed production overhead...................................................... £188,000Variable production overhead................................................. £2 per direct labour hourNon-production costs for the year ending 31 May 2002 are estimated to be:Selling and distribution overhead:Variable....................................................................................... 10% of selling priceFixed...................................................................................          £35,000Administrative overhead:Fixed...................................................................................          £50,000

Required:a) Calculate the production plan that will maximize profit for the year ending 31 May 2002. (7 marks)b) Based on the production plan that you have recommended in part (a), present a profit statement for the year ending 31 May 2002 in a marginal costing format. (9 marks)c) Discuss two problems that may arise as a result of your recommended production plan. (4 marks)d) Explain why the contribution concept is used in limiting factor decisions. (5 marks)