SCENARIO

Meat Free Ltd is a manufacturer of meat substitute food products. The company produces a vegetarian ready meal called The Sub and two vegetarian, meat replacement compound mixtures, the Veggie Pulled Pork (VPP) and the Veggie Lamb Shank (VLS).

There is some concern about the future of the company as market competition is high, and the board of directors are looking at new strategies to increase sales and profitability. According to the absorption costing scheme used by the last management accountant The Sub is making huge losses per unit and the marketing manager has reported that any increase in the selling price of this item will result in a reduction of sales volume. Consequently, it is being deliberated whether or not to stop the manufacture of The Sub and concentrate on the more prosperous production and selling of the VPP and VLS products.

You have been recently employed as a management accountant to provide fresh input into the decision-making process from a costing perspective and the following costing information has been provided:

Production Information: