Question
5. SR Company Limited produces three grades of a product super, good and normal. Each of these three grades of the productare high in demand
5. SR Company Limited produces three grades of a product super, good and normal. Each of these three grades of the productare high in demand and the company is able to sell whatever is produced. The machine operations which is part of overall process operations is a limiting factor. The company is operating at 100% capacity. The fixed cost is Rs.4,80,000. In addition, the Cost Accountant was able to extract the following information about the three grades of product. _ Product Super Good Normal Budgeted Production (units) 10,000 10,000 10,000 Process hours per unit 10 10 8 Machine hours per unit 6 5 4 Selling price per unit (Rs.) 360 340 300 Direct Materials cost per unit (Rs.) 200 180 150 Direct Labour cost per process hour (Rs.) 7 7 5 Variable Overheads per machine hours (Rs.) 5 10 12 _ Required: (i) Determine the contribution margin per unitof each grade of product (ii) Present an analysis to management showing the relative profitability of three grades of product, assuming machine operations are the limiting factor.
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5. SR Company Limited produces three grades of a product - super, good and normal. Each of these three grades of the productare high in demand and the company is able to sell whatever is produced. The machine operations which is part of overall process operations is a limiting factor. The company is operating at 100% capacity. The fixed cost is Rs.4,80,000. In addition, the Cost Accountant was able to extract the following information about the three grades of product. Super Good Normal 10,000 10,000 10,000 10 10 8 Product Budgeted Production (units) Process hours per unit Machine hours per unit Selling price per unit (Rs.) Direct Materials cost per unit (Rs.) Direct Labour cost per process hour (Rs.) 6 4 360 200 7 5 340 180 7 300 150 5 Variable Overheads per machine hours (Rs.) 5 10 12 Required: (i) Determine the contribution margin per unitof each grade of product (ii) Present an analysis to management showing the relative profitability of three grades of product, assuming machine operations are the limiting factorStep by Step Solution
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