The following three sections are independent from each other

a.Sam. Co is a Manufacturing company. Currently due to a labor strike the company has access to only to 27,000 direct labor hours available for producing three products named A and B and C. The following information is related to these products:

Product A

Product B

Product C

Maximum demand

5,500

7,500

4,000

Selling price per unit

57

36

25

Variable cost per unit

49.5

30

18

Direct labor hours required per unit

3

2

3.5

Required:

How many units of product A, B and C should Sam Co. produce this year? (4.5 marks)

b.Arya Inc. uses a joint production process to produce two products (regular and luxury). The Corporation has $200,000 of joint processing costs this year and is considering whether to process its two products beyond the split-off point. Information about the two products follow:

Regular

Luxury

Units produced

26,000

17,000

Total variable cost of processing further

$78,000

$119,000

Selling price per unit at split off point

20

55

Selling price per unit after further processing

26

62

Required:

Should the two products be processed further? Show all your calculations (4 marks)

c.A Corporation is composed of three divisions. The following information relates to these three Division:

A

B

C

Sales

$7,500,000

$8,000,000

$5,500,000

Variable cost

5,100,000

4,600,000

3,800,000

Contribution margin

2,400,000

3,400,000

1,700,000

Avoidable fixed cost

1,900,000

3,700,000

1,500,000

Operating income

$500,000

($300,000)

$200,000

The company is considering closing Division B. If division B is closed, then the sales of division C will increase by 5%, while sales of division A will decrease by 20%. What will be the impact on the company's overall profitability if Division B is closed?