Giant Ltd. manufactures three different types of products: X, Y and Z. It was expected that the production and demand for the next year on these products as follows:

Product X Product Y Product Z

Units 1500 2250 3000

Additional details about the products are also as follows:

Each unit Product X Product Y Product Z

Selling price 174 340 310

Materials 32 80 60

Labour 40 96 80

Variable overheads 24 60 48

Giant Ltd pays labour 8 an hour and expects its fixed overheads to be 240,000.

Required:

a) Calculate the production plan that will maximise profit for Giant Ltd for next year given that Giant Ltd has only managed to contract 45,000 labour hours for next year.

(7 marks)

b) Calculate Giants profit based on the production plan in A.

(3 marks)

c) It was found that Giant has already committed to a contract legally obligating it to supply 2,100 units of product Y. Recalculate the production plan that will maximise profit according to this newly factor.

(3 marks)

d) Discuss other factors that should be considered by Giant Ltd before adopting any suggested production plan.

(7 marks)

e) Absorption costing is another system that can be used to calculate the cost per unit of product/service. Explain whether marginal costing is more accurate than absorption costing system in terms of calculating the cost per unit with a discussion of the reasons.

(5 marks)