Question

In: Accounting

Siyi Ltd is a specialist engineering firm that makes four products, for which the following information...

Siyi Ltd is a specialist engineering firm that makes four products, for which the following information is available:

  A B C D
Selling price per unit £100 £64 £54 £62
Variable cost per unit £50 £40 £42 £30
Weekly demand (units) 40 70 50 80
Machine hours per unit 5 2 3 4

Due to a recent market boom, demand is now outstripping the capacity of its plant, which is constrained to 500 hours machine time per week. In the medium-term, the management will consider expanding capacity but there remains a short-term problem of how to allocate the available capacity among the four products.
  
Required:

A) Determine the optimising plan for using the available machine hours in the short-term, and calculate the maximum achievable contribution.
B) Calculate the shortfall in contribution imposed by the constraint on machine hours, the maximum contribution in the absence of a machine hour constraint, and how many additional machine hours are required.

Solutions

Expert Solution

Workings for Question A:

Answer to Question A:

Answer to Question B:


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