Only letter B.

QUESTION 1 JEB Ltd. manufactures three types of heaters - standard, retro and modem. The budgeted standard costs of each product are detailed below: Standard Retro Modern Direct materials 7.50 10.00 Direct Labour 5.00 10.00 8.00 Variable Overhead cost 8.00 12.00 Fixed Overhead cost 7.50 15.00 12.00 22.50 40.50 42.00 5.00 5.00 48.00 50.00 Sales Price Budgeted volumes (per quarter) 27.00 3,750 2,250 1,500 The following information has also been provided: Direct materials are a specialist mild steel which is priced at 10 per kg. Fixed overhead costs are attributed on the basis of direct labour hours. Production volumes are equal to sales volumes, with no stocks being held. The purchasing manager has advised that due a problem with the normal supplier, it is likely that the specialist mild steel will be limited to 4,000kg in the incoming quarter. Required: (a) Calculate the total breakeven point in units for a quarter. (8 marks) (b) Using appropriate calculations, advise JEB Ltd. on the optimum production plan detailing the mix of products that should be produced during the quarter in order to maximise profits in the context of the limited supply of specialist mild steel. (9 marks) Critically analyse the assumptions and limitations of cost-volume-profit analysis