Evaluate and discuss the contribution approach to decision making. Your explanation can be handwritten OR typed...

 

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Evaluate and discuss the contribution approach to decision making. Your explanation can be handwritten OR typed (approximately 270 words). (10 marks) ii. SEP Ltd is a specialist engineering plastics business that makes three products, for which the following information is available: Selling price Variable cost Weekly demand (units) Machine hours per unit PVDF 30 10 25 4 Rulon 20 11 60 3 SRBP 40 24 30 4 After several years of low trading, demand is now moving beyond the capacity of its plant, which is constrained to 200 hours machine time per week. In the medium-term, the management board will consider expanding capacity but there remains a short-term issue of how to allocate the available capacity among products PVDF, Rulon, and SRBP. Required: (a) Determine the optimising plan for using the available machine hours in the short-term, and calculate the maximum achievable contribution. (b) Calculate the shortfall in contribution imposed by the constraint on machine hours, the maximum contribution in the absence of a machine hour constraint, and how many additional machine hours are required. (c) Advise the management board of any qualitative factors that they should also consider alongside your calculations concerning how to maximise contribution. Your explanation can be handwritten OR typed (approximately 130 words). Evaluate and discuss the contribution approach to decision making. Your explanation can be handwritten OR typed (approximately 270 words). (10 marks) ii. SEP Ltd is a specialist engineering plastics business that makes three products, for which the following information is available: Selling price Variable cost Weekly demand (units) Machine hours per unit PVDF 30 10 25 4 Rulon 20 11 60 3 SRBP 40 24 30 4 After several years of low trading, demand is now moving beyond the capacity of its plant, which is constrained to 200 hours machine time per week. In the medium-term, the management board will consider expanding capacity but there remains a short-term issue of how to allocate the available capacity among products PVDF, Rulon, and SRBP. Required: (a) Determine the optimising plan for using the available machine hours in the short-term, and calculate the maximum achievable contribution. (b) Calculate the shortfall in contribution imposed by the constraint on machine hours, the maximum contribution in the absence of a machine hour constraint, and how many additional machine hours are required. (c) Advise the management board of any qualitative factors that they should also consider alongside your calculations concerning how to maximise contribution. Your explanation can be handwritten OR typed (approximately 130 words).

Answer rating: 100% (QA)

a To determine the optimizing plan for using the available machine hours in the shortterm we need to allocate the machine hours in a way that maximize... View the full answer