Rainbow Chip Company is a company that produces a variety of chocolates. Dark Choc and White...
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Rainbow Chip Company is a company that produces a variety of chocolates. Dark Choc and White Choc are the most profitable products for Rainbow Chip Company. The company produces Dark Choc and White Choc from different combinations of the same resource using a Just-in-time (JIT) production system. The selling price, cost information, and resource requirements of each of these two products are as follows: Dark Choc Product Selling price Direct materials: Cocoa powder (RM2.20 per gram) Milk powder (RM0.80 per gram) Sugar (RM1.40 per gram) Recesse Labours: Skilled (RM0.20 per minute) Unskilled (RM8 per hour) RM23.20 RM6.60 RMO.80 RM5.60 Cocoa powder Milk powder Sugar Skilled labour Unskilled labour RMO.80 RMO.40 White Choc RM16.80 The current pandemic Covid-19 is causing a huge reduction in the availability of the resources to produce companies' products which indirectly force the company to reduce production. With the economy is slowly growth, the company now wants to increase production again by ensuring that it uses the limited ingredients available to maximise profits by selling the optimum mix of Dark Choc and White Choc. RM4.40 RMO.40 RM2.80 Market research shows that the maximum demand for White Chocs is 2,000 bottles per week, although demand for Dark Chocs is unlimited. At a recent meeting of the purchasing and production managers to discuss the company's production plans for January 2021, the following resource availability for January 2021 was identified: 5,000 grams 1,600 grams unlimited 9,600 minutes (160 hours) unlimited RM1.00 RMO 20 Required: (show all calculations) a. Use graphic linear programming analysis to determine the optimum number of each product that Rainbow should produce for the month of January 2021. Rainbow's objective is to maximize as much profit as possible from available resources. Draw a graph on graph paper. Indicate all relevant information clearly on the graph. Determine the optimal number of units to be produced for each of the products. Determine the maximum total contribution. (13.25 marks) b. Facing the shortage of cocoa powder, Rainbow Chic Company has to source for supplies beyond its regular supplier. It had managed to source for a small amount of cocoa powder from a new supplier from Johor. Determine the maximum price that Rainbow Chic Company would be willing to pay the supplier from Johor for one additional gram of cocoa powder during the month of January 2021. (5.5 marks) c. Explain the relevant concept and rationale in the answer for (b) above. (4 marks) d. Explain the meaning of the term shadow prices. (1.25 marks) e. Describe the situations when it may be appropriate to use linear programming. (1 mark) Rainbow Chip Company is a company that produces a variety of chocolates. Dark Choc and White Choc are the most profitable products for Rainbow Chip Company. The company produces Dark Choc and White Choc from different combinations of the same resource using a Just-in-time (JIT) production system. The selling price, cost information, and resource requirements of each of these two products are as follows: Dark Choc Product Selling price Direct materials: Cocoa powder (RM2.20 per gram) Milk powder (RM0.80 per gram) Sugar (RM1.40 per gram) Recesse Labours: Skilled (RM0.20 per minute) Unskilled (RM8 per hour) RM23.20 RM6.60 RMO.80 RM5.60 Cocoa powder Milk powder Sugar Skilled labour Unskilled labour RMO.80 RMO.40 White Choc RM16.80 The current pandemic Covid-19 is causing a huge reduction in the availability of the resources to produce companies' products which indirectly force the company to reduce production. With the economy is slowly growth, the company now wants to increase production again by ensuring that it uses the limited ingredients available to maximise profits by selling the optimum mix of Dark Choc and White Choc. RM4.40 RMO.40 RM2.80 Market research shows that the maximum demand for White Chocs is 2,000 bottles per week, although demand for Dark Chocs is unlimited. At a recent meeting of the purchasing and production managers to discuss the company's production plans for January 2021, the following resource availability for January 2021 was identified: 5,000 grams 1,600 grams unlimited 9,600 minutes (160 hours) unlimited RM1.00 RMO 20 Required: (show all calculations) a. Use graphic linear programming analysis to determine the optimum number of each product that Rainbow should produce for the month of January 2021. Rainbow's objective is to maximize as much profit as possible from available resources. Draw a graph on graph paper. Indicate all relevant information clearly on the graph. Determine the optimal number of units to be produced for each of the products. Determine the maximum total contribution. (13.25 marks) b. Facing the shortage of cocoa powder, Rainbow Chic Company has to source for supplies beyond its regular supplier. It had managed to source for a small amount of cocoa powder from a new supplier from Johor. Determine the maximum price that Rainbow Chic Company would be willing to pay the supplier from Johor for one additional gram of cocoa powder during the month of January 2021. (5.5 marks) c. Explain the relevant concept and rationale in the answer for (b) above. (4 marks) d. Explain the meaning of the term shadow prices. (1.25 marks) e. Describe the situations when it may be appropriate to use linear programming. (1 mark)
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Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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