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Osbourne practice exam task 8 help

jodyewhitejodyewhite AAT Student Posts: 35
in Management Accounting: Decisions and Control
Hi All
I am struggling to remember how to calculate the optimal production units, I have enclosed a copy of the question.
Many Thanks

Comments

  • Ekaterina_SEkaterina_S Registered Posts: 12
    Hi Jo,

    In this one you need to calculate contribution per limiting factor( find out whether materials or labour hours are limited) and then rank contribution per limiting factor. Optimal production plan would be sales demand for product with highest contribution per limiting factor and calculate how many can be produced with left resources.

    Let me know if you need help with calculations.
    AAT_Team
  • jodyewhitejodyewhite AAT Student Posts: 35
    Hi Ekaterina
    I can see how the materials, labour , contribution and limiting factor are worked out. How do they come to the answer of 10,000 units for each product, as the 50,000 kg is limited to 25,000 units.
    Many Thanks.
    AAT_Team
  • Ekaterina_SEkaterina_S Registered Posts: 12
    Contribution per limiting factor for Chef is £12 and for Field £10. So, we can produce the whole amount required for Chef ( because contribution per limiting factor is higher) which is 10000 units. We need 20000kg to produce 10000 units of Chef (10000units*2kg/unit=20000kg).
    Because we have 50000 kg for both products only 30000 kg are left for Field. One unit of Field product requires 3 kg of material, therefore, we can only produce 10000 units (30000/3).

    I hope it helps.
    AAT_Team
  • jodyewhitejodyewhite AAT Student Posts: 35
    Excellent thank you again for helping. :-)

    JO
  • Ekaterina_SEkaterina_S Registered Posts: 12
    You are welcome.
    Good luck with your exam.
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