Q3

A company based near the White Volta manufactures two products, product X and product Y, on the same machines. Sales demand for the products exceeds the machine capacity of the companys production department. The potential sales demand in each period is for 8,000 units of product X and 12000 units of product Y. Sales prices cannot be increased due to competition from other firms in the markets. The maximum machine capacity in the production department is 32,000 hours in each period.

The following cost and profitability estimates have been prepared:

Product X Product Y

GHS GHS

Sales price 22 27

Direct materials 10 9

Direct labour and variable overhead 6 11

Contribution per unit 6 7

Required

1. Using marginal costing principles, calculate the profit-maximising output in each period and calculate the amount of profit.
2. Explain how throughput accounting differs from marginal costing in its approach to maximising profit
3. Use throughput accounting to calculate the throughput accounting ratio for product X and for Product Y. You should assume that the direct labour cost and variable overhead cost in your answer to part (a) is fixed in the short.
4. Using throughput accounting principles, calculate the profit- maximising output in each period and calculate the amount of profit.