In each quarter of every year, the maximum capacity of Friends Co. factory is 3,600 hours available for sorting and re-packing two sorts of imported apples in special boxes where each box contains only one ton of either the red or the yellow apples. The monthly common committed fixed costs of the company are ?100,000, and the following estimates are presented in relation to the coming quarter which will start 1st January 2013:

Required

(a) Do you consider the sorting and re-packing hours that are expected to be available in the 1st quarter of the coming year a scarce resource to Friend Co.? Explain your answer.

(b) What is the optimal imports mix Friends Co should consider for the first quarter of 2013 in the light of the data available?

(c) What is the relevance ? if any ? of the company?s committed fixed costs to the decision of determining the optimal budget of imports? Discuss in details referring to the concept of relevant information for decision making purposes.

Transcribed Image Text:

Maximum demand in the local market Selling price per box Sorting and re-packing time required per box Contribution margin per box Red apple 148 boxes £16,000 12.5 hours £4,000 Yellow apple 300 boxes £10,000 10 hours £4,800 Maximum demand in the local market Selling price per box Sorting and re-packing time required per box Contribution margin per box Red apple 148 boxes £16,000 12.5 hours £4,000 Yellow apple 300 boxes £10,000 10 hours £4,800

Answer rating: 100% (QA)

Red Yellow Max Demand 148 300 Packing HoursBox 125 10 ContributionBox 400000 480000 Packing Hours 36... View the full answer