Nifty Ltd. manufactures three different types of electric scooters: 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

Nifty 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 Nifty Ltd. for next year given that Nifty Ltd. has only managed to contract 45,000 labour hours for next year.

(7 marks)

b) Calculate Nifty Ltd.s profit based on the production plan in A.

(3 marks)

c) It was found that Nifty Ltd. has already committed to a contract legally obligating it to supply 2100 units of product Y. Recalculate the production plan that will maximise profit according to this newly factor.

(3 marks)

d) Discuss the non-financial factors that should be considered by Nifty Ltd. before adopting any of the suggested production plan.

(7 marks)

e) Discuss the benefits of using a marginal costing system in comparison to absorption costing system when making operational decisions.

(5 marks)