Question
Giga Ltd makes 3 products, GA1, GA2 and GA3. The following standard cost card applies to all of them. Cost per unit Product GA Product
Giga Ltd makes 3 products, GA1, GA2 and GA3. The following standard cost card applies to all of them.
Cost per unit | |||
Product GA | Product GA1 | Product GA2 | |
Selling price | 70 | 80 | 90 |
Direct materials | 15 | 10 | 20 |
Direct Labour | 22 | 26 | 30 |
Variable overheads | 12 | 14 | 16 |
Variable selling expenses | 7 | 8 | 9 |
Fixed overheads | 6 | 7 | 8 |
Total cost per unit | 62 | 65 | 83 |
Historical data shows that every month, Giga Ltd sells 300 units in equal portions between the 3 products to the general public. At the beginning of 2021, Giga Ltd entered into an agreement with GD Ltd to supply them with 500 units of each product every month.
Due to strikes over the past months, the company found itself with a shortage of labour and currently does not have enough people to exceed 10,510 labour hours per month. Giga Ltd pays for Labour at a rate of N$4 per hour and fixed overheads are absorbed by direct labour hours.
Required: Given the limited resources, how much will one unit of the least prioritized product contribute towards the profit of Giga Ltd?
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