Question

Caribbean Manufacturers Ltd produces two (2) products, RUN100 and RUN400. The following table provides cost data per unit for both products for June 2016:

COST CARD

Details	RUN100 ($)	RUN400 ($)
Direct materials	60	180
Direct labour ($60 per hour)	360	180
Variable overheads	60	60
Total	480	420

The sales price per unit is RUN100, $840 per unit and RUN400, $660 per unit. During June 2016, the amount of direct labour hours available was limited to 15,000 hours and fixed costs were estimated to be $450,000. There were no opening stocks of finished goods or work in progress. Sales demand in June 2016 was expected to be:

RUN100: 1,800 units

RUN400: 2,800 units

Required:

1. Determine the contribution earned by each product per unit.

2. Determine the number of hours required to manufacture each product.

3. Determine the limiting factor by comparing the labour hours available with the labour hours required.