QUESTION 2: The following information relates to Pir-hana Foundries Lid's budget for the year to 30* April 2022: Product K L M Total EOOOs EO003 EOOOS EO003 Sales 700 400 250 1350 Direct materials 210 60 30 300 Direct labour 100 200 200 500 Variable overhead 90 60 200 Fixed overhead 20 40 40 100 Total budgeted cost 420 360 320 1100 Profit / loss 280 40 (70) 250 Budgeted sales (units) 140 20 25 (Fixed overheads are apportioned on the basis of direct labour hours) The directors are worried about the loss that product M is budgeted to make and various suggestions have been made to counteract the loss: Stop selling product M; Increase M's selling price by 20%; Reduce M's selling price by 10%; . Reduce its costs by purchasing a new machine costing $350,000 thereby decreasing the direct labour cost by $100,000 (the machine would have a life of five years; is residual value would be nil). REQUIRED: a) Calculate the budgeted profit and evaluate each of the proposals. Provide justifications for the options which you would reject and for the option you would recommend to Pir-hana Foundries Lid's directors. (Show all your calculations) (16 marks) b) Explain the impact of limiting factors and how you would allow for them. (4 marks) c) Discuss any other relevant matters that the directors should consider.