MC Ltd operates four departments, in which three products are manufactured. The company is currently experiencing a critical shortage of labour in department 3, and there are no immediate prospects of an improvement in this situation.

REQUIRED

(a) Show the contribution which each product can make towards company profit

(b) Suggest the product on which the company should concentrate its resources, giving brief reasons

(c) Indicate the steps necessary to achieve the production you have recommended in answer to (b)
above

(d) Calculate the amount of profit per annum that could be expected if the company were to adopt your suggestion Product Cost:
Direct material:
Direct wages:
Dept: 1 2 3 4 Variable overhead Selling price Budgeted data for year:
Direct wages:
Dept: 1 2 3 4 Fixed overhead Price per unit A =3.0 8= 5.0 Rate per hr 1.50 1.75 2.00 2.25 /CAA. PS, Part I, Cost Accounting 2, May 1979.
X Units 3 4 hr 4 12 3 8 $
20 136 y Units 5 6 hr 8 4 2 12 $
25 140 495000 1225000 360000 1175000 1000000