QUIZ AA025 ACCOUNTING 2 TOPIC 11: DECISION MAKING - LIMITING FACTOR

QUIZ AA025 ACCOUNTING 2

TOPIC 11: DECISION MAKING - LIMITING FACTOR

QUESTION 1

A company manufactures three products (M,N,O). All direct labour are the same grade and are paid at RM11 per hour. It is anticipated that there will be a shortage of direct labour hour in the following period which will prevent the company from achieving the following sales target: (available direct labour hour only 26,400)

              Product M                       3,600 units

              Product N                        8,000 units

              Product O                        5,700 units

 

Selling price anf costs are shown below:

Products	M	N	O
	RM	RM	RM
Selling price	100	69	85
Variable costs
Production **	51.60	35	42.40
Non-production	5	3.95	4.25
Fixed costs
Production *	27.20	19.80	21
Non-production	7.10	5.90	6.20
** include the cost of direct labour	24.20	16.50	17.60

 

REQUIRED:

      i.        Decide what is the limiting factor for this company and show the shortfall for the next period.

(4 ½ marks)

      ii.       Calculate contribution margin per limiting factor unit for product M, N and O.

(6 marks)

      iii.     Show the planning schedule for product M, N and O.

(4 marks)

QUESTION 2

Epel Enterprise produces three types of products: CT, CZ and CK. The following data is related to the products.

	Product CT	Product CZ	Product CK
Selling price per unit	RM43	RM25	RM15
Variable cost per unit	RM25	RM15	RM8
Machine hours required per unit	3 hours	2 hours	1 hour
Market demand	200 units	250 units	150 units

 

Market demand cannot be fully met because of the limited machine hours of 1,000 hours per month.

REQUIRED:

      i.       Calculate the contribution margin per machine hours for each product.

(4 ½ marks)

      ii.      Advise which product should be given production priority based on (i) above.

(2 marks)

    iii.    Calculate the units of CT, CZ, and CK to be produced to earn the highest income based on the limiting factor.

(4 marks)

ANSWER

As Salam and Hi everyone... My name is Puan Asmazatul Yusfiziati Binti Mohd Yusof CA(M) or you can call me Madam Fizi. I'm an Accounting lecturer at Negeri Sembilan Matriculation College (KMNS), Kementerian Pendidikan Malaysia. This blog (www.madamfizi.com) was created to share learning materials on the subject of Accounting for Matriculation, Form 6, Foundation, Diploma, Secondary School and related students.