Question 1

ABC Company ("ABC") is Namibian based company that produces three products, A, B, and C through aprocess costing system. All the three products pass through process 1 which only has an hourly capacityto produce 1 200 units of A, 1 500 units of B and 600 units of C. The process operates eight hours in a

day.

The following information relates to the three products:

Product Selling price Material cost

per unit (N$) per unit (N$)

A 150 70

B 120 40

C 300 100

The three products combined incur a conversion cost of N$720 000 per day.

Requirement:

1.1 Determine the total amount of profit available to ABC if they are able to produce

6 000 units of A, 4 500 units B and 1 200 units of C per day. (4 marks)

1.2 Calculate the throughput ratio for each product. (8 marks)

1.3 Assuming the three products have unlimited demand, advise ABC on how to optimisetheir production. (4 Marks)

N. B. Where necessary, show all the relevant workings

Total: (16 Marks)