Required: (a) Prepare, on a relevant cost basis, the lowest cost estimate that could be used...

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Required: (a) Prepare, on a relevant cost basis, the lowest cost estimate that could be used as the basis for a quotation. Explain briefly your reasons for using each of the values in your estimate. (19 marks) (b) There may be a possibility of repeat orders from EXE plc which would occupy part of normal production capacity. What factors need to be considered before quoting for this order? (6 marks) Question 3 X Ltd. Manufacture 3 products for which details are: A B C Selling price $25 $20 $15 Materials 7 6 Labour (at $0.75 per hour) 5 9 6 Variable overheads 3 3 3 3 Total costs 19 15 Contribution 11 6 5 4 Sales demand for the period is limited as follows: Product A 4000 units Product B 6000 units Product C 6000 units The supply of labour is limited to 90000 hours. Required: (a) Recommend, with supporting workings the quantities of different products in the production mix that will maximize the profits of X Ltd in the situation with the use of limited labour for the forthcoming period. (b) X Ltd has a valued customer to whom they wish to guarantee the supply of 2000 units of each product next period. Would this alter your recommended production plan? (c) Suggest two ways, other than limiting the production volumes, that could solve the problem of the shortage of the labour time. Required: (a) Prepare, on a relevant cost basis, the lowest cost estimate that could be used as the basis for a quotation. Explain briefly your reasons for using each of the values in your estimate. (19 marks) (b) There may be a possibility of repeat orders from EXE plc which would occupy part of normal production capacity. What factors need to be considered before quoting for this order? (6 marks) Question 3 X Ltd. Manufacture 3 products for which details are: A B C Selling price $25 $20 $15 Materials 7 6 Labour (at $0.75 per hour) 5 9 6 Variable overheads 3 3 3 3 Total costs 19 15 Contribution 11 6 5 4 Sales demand for the period is limited as follows: Product A 4000 units Product B 6000 units Product C 6000 units The supply of labour is limited to 90000 hours. Required: (a) Recommend, with supporting workings the quantities of different products in the production mix that will maximize the profits of X Ltd in the situation with the use of limited labour for the forthcoming period. (b) X Ltd has a valued customer to whom they wish to guarantee the supply of 2000 units of each product next period. Would this alter your recommended production plan? (c) Suggest two ways, other than limiting the production volumes, that could solve the problem of the shortage of the labour time.

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Answer a Recommended Production Quantities to Maximize Profits To maximize profits we need to alloca... View the full answer