Question from the Chartered Institute of Management Accountants, Stage 1, November 1995. (20 minutes)

ABC Limited makes three products, all of which use the same machine which is available for 50,000 hours per period. The standard costs of the products per unit are: mki2

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PRODUCT A PRODUCT B PRODUCT C () (E) () Direct materials 70 40 80 Direct labour: Machinists (8 per hour) 48 32 Assemblers (6 per hour) 36 40 Total variable cost 154 112 Selling price per unit 200 158 Maximum demand (units) 3,000 2,500 178 224 5,000 56 Fixed costs are 300,000 per period. ABC Limited could buy in similar quality products at the following unit prices: A 175 B 140 C 200