1. Show ALL workings. Marks may be deducted for loss of clarity of expression and neatness of presentation.

Question 2

Mango Limited manufactures three electronic products, namely, R, S and T. The company is preparing the budget for the year 2021. The following are some budgeted data:

Same direct material and direct labour are used for all the three products. The available supply of direct labour hours is restricted to 27,100 hours. Fixed overhead is estimated to be $480,000.

Required:

(a) With supporting workings, analyse whether direct labour hour is the limiting factor for Mango Limited. (8 marks)

(b) Calculate the contribution per unit of the limiting factor for each product and determine the production mix which will maximize the companys profits. Show all workings. (21 marks)

(c) Prepare an operating statement to show the contribution from each product, the total contribution and overall profit that will be earned at the production mix determined in part (b).

(6 marks)

S Sales demand for the year 2021 (units) 3,000 3,500 4,200 1,070 715 890 140 210 280 Selling price per unit Variable costs per unit: Direct materials ($7 per kg) Direct labour ($50 per hour) Direct expenses Variable production overhead 200 100 150 80 70