Question
Kwinana Ltd makes three types of products, the details of which are as follows: Product CT101 CT151 CT350 Selling price per unit ($) 25 20
Kwinana Ltd makes three types of products, the details of which are as follows:
| Product | CT101 | CT151 | CT350 |
| Selling price per unit ($) | 25 | 20 | 23 |
| Variable cost per unit ($) | (10) | (8) | (12) |
| Weekly demand (units) | 25 | 20 | 30 |
| Machine time required per unit (hours) | 4 | 3 | 4 |
Fixed cost is not affected by the choice of product because all three products use the same machine. Machine time is limited to 148 hours a week.
Required:
| a) | Which combination of products should be manufactured if the Kwinana is to produce the highest profit? |
|
| b) | What is the maximum price that the business concerned would logically be prepared to pay to have the remaining CT101 machined by a subcontractor, assuming that no fixed or variable cost would be saved as a result of not doing the machining in-house? |
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Financial Accounting
Authors: Robert Kemp, Jeffrey Waybright
2nd edition
978-0132771801, 9780132771580, 132771802, 132771586, 978-0133052152
