Kawan Sdn Bhd (KSB) produces three products (X1, X2 and X3) from the same resources (but...

Kawan Sdn Bhd (KSB) produces three products (X1, X2 and X3) from the same resources (but in different quantities). Extract from the original budget for Month of December are shown below:

Products X1   X2   X3
Selling price (RM per unit) 24   41   42
Total cost (RM per unit) 20   20   35
Labour hours per unit 0.5   2   1.5
Machine hours per unit 0.5   2   0.75
Production and sales (unit)   5,000   6,000   11,000

Variable costs are 40% of the total cost of each unit. Fixed costs are absorbed at the rate of 120% of variable costs based on the budgeted production quantities as shown above.
It has now become known that during month of December essential maintenance work will have to be carried out. This will limit the availability of resources to:
Labour hours : 32,000 hours
Machine hours : 20,000 hours

Required:

a) Determine either machine hour or labour hours is the limiting factors for the above situation.

b) Prepare a statement that shows the profit maximising production plan for month of December and the resulting profit or loss.

(Total:15 Marks)

Expert Solution

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ekkarill92 answered 2 years ago

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