Required:

1) Compare and contrast the advantages and disadvantages of using Limiting Factor Analysis and linear programming-graphical method as a tool for managerial decision making in companies. (08 marks)

2) Identify the limiting factor for Saturn Plc. (04 marks)

3) Determine the production plan that will optimise the contribution of Saturn Plc. (10 marks)

4) Prepare a profit statement that clearly shows the maximum profit that could be achieved in the year ending September 2019 based on the production plan you have finalised in question (3). (03 marks)

Question 3: Satum Ple is currently preparing its budget for the year ending September 2019. The company manufactures and sells three products Dione, Pandora and Titan. The unit selling price and the variable cost structure of each product is budgeted as follows. Dione Pandora Titan () () (E) Selling price 50 62 16 Variable costs Direct labour 12 24 3 Direct materials 13 3.5 4 Overheads 5 2.5 3 30 30 10 Direct labour rate is budgeted at 3 per hour and direct material cost at 1 per kilogram, and fixed costs at 500,000 per annum. The production manager has estimated that the company will have a minimum production capacity of 114,000direct labour hours and the direct material available will be restricted to 299,000kilograms. A meeting of the board of directors has been convened to discuss the budget and to resolve the problem as to the quantity of each product, which should be made and sold. The sales director presented a recent market survey, which reveals the market demand for the company's products will be as follows. Product Units Dione 12,000 Pandora 6,000 Titan 30,000 The production director proposes that, since Titan only contributes 6 per unit, the product should no longer be produced, and the surplus capacity transferred to produce additional quantity of Dione and Pandora. The sales director does not agree with the proposal. Titan is considered to be necessary to complement the product range and to maintain customer goodwill. If Titan is not offered, the sales Version 1 Page 4 of 10 manager believes that the sales of Dione and Pandora will be seriously affected. After further discussion, the board decided that a minimum of 5,000 units of each product should be produced. The remaining production capacity would then be allocated to achieve maximum profit possible. Required: 1) Compare and contrast the advantages and disadvantages of using Limiting Factor Analysis and linear programming-graphical method as a tool for managerial decision making in companies. (08 marks) 2) Identify the limiting factor for Saturn Plo. (04 marks) 3) Determine the production plan that will optimise the contribution of Saturn Plc. (10 marks) 4) Prepare a profit statement that clearly shows the maximum profit that could be achieved in the year ending September 2019 based on the production plan you have finalised in question (3). (03 marks)