ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 9.2.2 ADVANCED MANAGERIAL ACCOUNTING [100] QUESTION ONE [40] Zek Ltd assembles heavy industrial switchboxes. Hitherto, Zek Ltd has assembled only one type, but recently a decision was made to expand the product range into two types. The following data pertains to each switchbox: Existing product Z686 New product Z797 (R) (R) Selling price per unit 8 000 6 800 Variable costs per unit: Direct materials 6 000 5 600 Direct labour 500 400 500 200 Manufacturing overhead Specific fixed costs per day 10 000 5 000 Zek Ltd's total general fixed costs per day amount to R27 000. The organisation operates its factory 24 hours per day and this equates to one operating cycle. Each switchbox goes through two processes, namely assembly and testing. The number of units which can be assembled or tested in one operating cycle is as follows: Assemble Test Z686 2 6 Z797 6 3 Zek Ltd is limited to 600 assembly hours and 400 testing hours in one operating cycle. Management is anxious to ascertain the following, but are unsure as to how to determine these factors: 1. The most profitable daily (that is in one operating cycle) production combination REGENT BUSINESS SCHOOL (RBS) - JANUARY 2021 31 ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT- ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 2. The minimum number of units which should be produced in one operating cycle if Zek Ltd wishes to achieve a total daily profit of R10 000. 1.1 (3) Required Explain why linear programming is appropriate in determining the optimal production solution for Zek Ltd. 1.2 Outline the steps to be undertaken when using the graphic linear programming method. (5) 1.3 Determine, using graphic linear programming, the production combination for Zek Ltd which maximises daily profit. (Draw the graph in your answer book. Ensure that you label the graph comprehensively and clearly.) 1.4 Solving algebraically, verify your answer in (C). (2) 1.5 Calculate the production mix which will achieve the desired daily profit of R10 000 (8) 1.6 Outline some key assumptions and limitations pertaining to linear programming. (17)