Co A manufactures a range of products, including Products X and Y. Forecast statements of profit...

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Co A manufactures a range of products, including Products X and Y. Forecast statements of profit or loss for next year are as follows: Sales Cost of production Materials Direct labour Fixed overhead Gross margin Selling costs Net margin X $'000 250 180 50 15 5 45 (40) Y $'000 300 150 60 15 18 (40) The directors are considering the closure of the X and Y product line, due to the losses incurred. You obtain the following information: (1) (2) Fixed production overheads consist of an apportionment of general factory overheads, based on one sixth of direct materials cost and other overheads that are specific to the product concerned. Selling costs are a 10% commission paid to sales staff and the remainder is an apportionment of general salary not specific to the product. In order to maximise profit Co A should: O Shut down production of both Product X and Y O O Shut down production of Product X and continue to produce Product Y Shut down production of Product Y and continue to produce Product X Continue to produce both Product X and Product Y Co A manufactures a range of products, including Products X and Y. Forecast statements of profit or loss for next year are as follows: Sales Cost of production Materials Direct labour Fixed overhead Gross margin Selling costs Net margin X $'000 250 180 50 15 5 45 (40) Y $'000 300 150 60 15 18 (40) The directors are considering the closure of the X and Y product line, due to the losses incurred. You obtain the following information: (1) (2) Fixed production overheads consist of an apportionment of general factory overheads, based on one sixth of direct materials cost and other overheads that are specific to the product concerned. Selling costs are a 10% commission paid to sales staff and the remainder is an apportionment of general salary not specific to the product. In order to maximise profit Co A should: O Shut down production of both Product X and Y O O Shut down production of Product X and continue to produce Product Y Shut down production of Product Y and continue to produce Product X Continue to produce both Product X and Product Y

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