12. Sun-Moon Ltd. manufactures and sells two products 'Sun' and 'Moon'. Both Sun and Moon use...

  

Transcribed Image Text:

12. Sun-Moon Ltd. manufactures and sells two products 'Sun' and 'Moon'. Both Sun and Moon use a regular machine while Sun uses another high-precision machine as well. The following information is available for the next quarter. Selling Price per unit (Rs.) Variable Manufacturing Cost per unit (Rs.) Variable Marketing Cost per unit (Rs.) Budgeted Allocation of Fixed Overhead Costs (Rs.) | 18,00,000 2.0 Regular Machine Hours per unit 900 250 Further information is available as follows: Sun 2,500 1,600 150 85,00,000 1.0 Moon 4,000 Variable Manufacturing Cost per unit (Rs.) Variable Marketing Cost per unit (Rs.) Budgeted Allocation of Fixed Overhead Costs (Rs.) 18,00,000 Regular Machine Hours per unit 2.0 Further information is available as follows: 900 250 1,600 150 85,00,000 1.0 Sun-Moon Ltd. faces a capacity constraint of 60,000 hours on the regular machine for the next quarter and there is no constraint on the high precision machine for the next quarter. Out of Rs. 85,00,000 budgeted allocation of fixed overhead costs to product Moon, Rs. 60,00,000 is payable for hiring the high precision machine. This cost is charged entirely to product Moon. The hiring agreement can be cancelled at any time without penalties. All other overhead costs are fixed and cannot be changed. A minimum quantity of 12,500 units per quarter of Sun must be produced to fulfill a commitment to a customer. Any quantity of any product can be sold at the given prices. Required: a) Calculate the product mix of Sun and Moon which would maximize the relevant operating profit of Sun-Moon Ltd. in the next quarter. b) Sun-Moon Ltd. can double the quarterly capacity of regular machine at a cost of Rs. 28,00,000. Calculate the new product mix and the amount by which the relevant operating profit will increase. 12. Sun-Moon Ltd. manufactures and sells two products 'Sun' and 'Moon'. Both Sun and Moon use a regular machine while Sun uses another high-precision machine as well. The following information is available for the next quarter. Selling Price per unit (Rs.) Variable Manufacturing Cost per unit (Rs.) Variable Marketing Cost per unit (Rs.) Budgeted Allocation of Fixed Overhead Costs (Rs.) | 18,00,000 2.0 Regular Machine Hours per unit 900 250 Further information is available as follows: Sun 2,500 1,600 150 85,00,000 1.0 Moon 4,000 Variable Manufacturing Cost per unit (Rs.) Variable Marketing Cost per unit (Rs.) Budgeted Allocation of Fixed Overhead Costs (Rs.) 18,00,000 Regular Machine Hours per unit 2.0 Further information is available as follows: 900 250 1,600 150 85,00,000 1.0 Sun-Moon Ltd. faces a capacity constraint of 60,000 hours on the regular machine for the next quarter and there is no constraint on the high precision machine for the next quarter. Out of Rs. 85,00,000 budgeted allocation of fixed overhead costs to product Moon, Rs. 60,00,000 is payable for hiring the high precision machine. This cost is charged entirely to product Moon. The hiring agreement can be cancelled at any time without penalties. All other overhead costs are fixed and cannot be changed. A minimum quantity of 12,500 units per quarter of Sun must be produced to fulfill a commitment to a customer. Any quantity of any product can be sold at the given prices. Required: a) Calculate the product mix of Sun and Moon which would maximize the relevant operating profit of Sun-Moon Ltd. in the next quarter. b) Sun-Moon Ltd. can double the quarterly capacity of regular machine at a cost of Rs. 28,00,000. Calculate the new product mix and the amount by which the relevant operating profit will increase.

Answer rating: 100% (QA)

a To calculate the product mix of Sun and Moon that would maximize the relevant operating profit of SunMoon Ltd in the next quarter we need to determine the contribution margin per unit for each produ... View the full answer