WTL manufactures and sells four products: W, X, Y, and Z from a single factory. Each of the products is manufactured in batches of 100 units using a just-in-time manufacturing process and consequently there is no inventory of any product. This batch size of 100 units cannot be altered without significant cost implications. Although the products are manufactured in batches of 100 units, they are sold as single units at the market price. WTL has a significant number of competitors and is forced to accept the market price for each of its products. It is currently reviewing the profit it makes from each product, and for the business as a whole, and has produced the following statement for the latest period:

WTL is concerned that two of its products are loss making and has carried out an analysis of its products and costs. This analysis shows:1. The sales of each product are completely independent of each other.2. The overhead costs have been absorbed into the above product costs using an absorption rate of $2 per machine hour.3. Further analysis of the overhead cost shows that some of it is caused by the number of machine hours used, some is caused by the number of batches produced and some of the costs are product specific fixed overheads that would be avoided if the product were discontinued. Other general fixed overhead costs would be avoided only by the closure of the factory. Details of this analysis are as follows:

Required:(a) Prepare a columnar statement that is more useful for decision-making than the profit statement prepared by WTL. Your statement should also show the current total profit for the business.(b) Prepare a report to the board of WTL that:(i) Explains why your statement is suitable for decision- making;(ii) Advises WTL which, if any, of its four products should be discontinued in order to maximize its company profits.(c) Calculate the break-even volume (in batches) for Product W.(d) Explain how WTL could use Value Analysis to improve its profits.

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Total Product Number of: units sold Machine hours Direct labour hours 80000 100000 130000 150000 200000 195000 80000 775000 300000 50000 335 000 130000 80 000 75000 Sales Direct materials Direct labour Overhead costs Profit/(Loss) 1300000 2260000 2120000 1600000 7280 000 2650 000 2680 000 1550 000 400000 300000 910000 940000 500000 400 000 640000 160 000 1040000 390 000 (80 000) 600000 400000 600000 (100 000) 200000 380 000 $000 $000 Machine hour related 310 Batch related 230 Product specific fixed overhead: Product W 500 Product X Product Y 100 Product Z 700 General fixed overhead 310 1550