QUESTION FIVE

Fee Ltd makes four products, A, B, C and D, and has produced the following budgeted figures for the forthcoming period:

A	B	C	D
Demand (units) 4,000	1,000	1,800	1,500
Income( K ) 40,000 Costs (K)	20,000	27,000	38,400
Material 12,000	8,000	12,000	12,000
Labour 12,000	6,000	8,000	15,000
Variable Overhead 2,000	1,000	1,700	2,400
Fixed Overhead 6,000	4,000	5,000	6,000

Labour is paid at K10 per hour and is limited to 3,800 hours for the period. Materials are bought at K20 per kg and 2400 kgs of material is available.

Required:

1. Find the limiting factor if the company wishes to produce the budgeted units as above. (3 Marks)
2. Calculate and determine the order of profitability. (6Marks)
3. Calculate the production mix that will maximise profit for the period and the profit that will result if that mix is produced. (14 Marks)
4. Calculate the increase in profit if an extra 150 units of the limiting factor are made available. (2 Marks)