Q2 Rezz Co makes and sells two products, Mand H, each of which passes through the sam e automated production operations. The following estimated information is available for period 1 Product data M H Direct material cost (Ghc) 2 40 Variable production overhead cost (hc) 28 4 Overall hours per product unit (hours) 0.25 0.15 Original estimates of production / sales of product M and H are 130,000 units and 40,000 units respectively. The selling price per unit for M and Hare Ghc 50 and Ghc 60 respectively. Maximum demand for each product is 30% above the estimated sales levels. Total fixed production overhead cost is Ghc 1,770,000. This is absorbed by pro ducts M and H at an average rate per hour based the estimated production levels One of the production operations has a maximum capacity of 3,075 hours which has be en identified as a bottleneck which limits the overall estimated production/sales of prod ucts X and Y. The bottleneck hours required per product units for product Mand Hare 0. 02 and 0.015 respectively. Required: (a) Calculate the mix in (units) of product M and H which will maximize net profit and the value (in Ghc) of the maximum net profit. (b) Rezz Co has now decided to determine the profit maximizing mix of product M and H based on the throughput accounting principles of maximizing the throu ghput return per production hours of the bottleneck resource. Given that the variable overhead cost, based on the value (in Ghc) which applies t o the original estimated production/sales mix is now considered to be fixed for th e short term. i. Calculate the mix (of units) of product M and H which will maximize net profit and the value of the net profit. ii. Calculate the throughput accounting ratio for product H iii. It is estimated that, the direct material cost per unit of product H may increase by 20% due to shortage of supply. Calculate the revised throughput accountin gratio for product H. Q2 Rezz Co makes and sells two products, Mand H, each of which passes through the sam e automated production operations. The following estimated information is available for period 1 Product data M H Direct material cost (Ghc) 2 40 Variable production overhead cost (hc) 28 4 Overall hours per product unit (hours) 0.25 0.15 Original estimates of production / sales of product M and H are 130,000 units and 40,000 units respectively. The selling price per unit for M and Hare Ghc 50 and Ghc 60 respectively. Maximum demand for each product is 30% above the estimated sales levels. Total fixed production overhead cost is Ghc 1,770,000. This is absorbed by pro ducts M and H at an average rate per hour based the estimated production levels One of the production operations has a maximum capacity of 3,075 hours which has be en identified as a bottleneck which limits the overall estimated production/sales of prod ucts X and Y. The bottleneck hours required per product units for product Mand Hare 0. 02 and 0.015 respectively. Required: (a) Calculate the mix in (units) of product M and H which will maximize net profit and the value (in Ghc) of the maximum net profit. (b) Rezz Co has now decided to determine the profit maximizing mix of product M and H based on the throughput accounting principles of maximizing the throu ghput return per production hours of the bottleneck resource. Given that the variable overhead cost, based on the value (in Ghc) which applies t o the original estimated production/sales mix is now considered to be fixed for th e short term. i. Calculate the mix (of units) of product M and H which will maximize net profit and the value of the net profit. ii. Calculate the throughput accounting ratio for product H iii. It is estimated that, the direct material cost per unit of product H may increase by 20% due to shortage of supply. Calculate the revised throughput accountin gratio for product H
