) Explain relevant cost.

(b) How can you determine the relevant cost for machinery?

(c) AA Craft Enterprise was set up as partnership of three local artists to provide means of

selling their hand-craft products in and around the Cape Coast Castle. One of the partners,

a ceramic artist, has developed a business plan, which involves creating a workshop at the

rear of the stores. The artist will run the workshop and provide sessions to groups in the art

of ceramic work and painting. It is anticipated that the artist will have only 35 labour hours

a week available for the sessions. The following information has been estimated for each

of the three groups:

Adult

School Children

GH

GH

GH

Sales (price per group)

120

150

144

Materials

48

60

72

Labour

24

32

16

Total variable cost per group

72

92

88

Labour hours per group (artists time)

1.5 hours

2 hours

1 hour

Estimated number of group bookings per week 8

10

7

The total fixed cost for the workshop per week are estimated at GH667. The artist is concerned

that he needs to be present for the full duration of each workshop, he cannot provide for the

estimated number of bookings per week.

Required:

(a) Determine the production plan that would maximize profit during the period.

(b) Prepare the profit plan for the business.