Question from the Association of Chartered Certified Accountants, Professional Stage Module E, June 1997. (45 minutes)

The Alphab Group has five divisions, A,B,C, D and E. Group management wish to increase overall group production capacity per year by up to 30,000 hours. Part of the strategy will be to require that the minimum increase at any one division must be equal to 5% of its current capacity.

The maximum funds available for the expansion programme are

£3,000,000. Additional information relating to each division is as follows: njuy41

Transcribed Image Text:

DIVISION EXISTING CAPACITY (HOURS) A 20,000 B 40,000 C 24,000 D 50,000 E 12,000 INVESTMENT COST AVERAGE CONTRIBUTION PER HOUR (E) PER HOUR () 100 120 200 878 90 75 12.50 9.50 11.00 8.00 14.00 A linear programme of the plan has been prepared in order to determine the strategy which will maximise additional contribution per annum and to provide additional decision-making information. Appendix i shows a print-out of the LP model of the situation.