Management accounting: Budgeting Practice Paper Question 5e

KAF

Hi,

Could someone help me to work out the without overtime maximum sales volume and the with unlimited overtime section please?

Pian32

As you've only showed part of the question I can't give you an answer.

For the sales volume you need to look at how long a unit takes and do:
Without overtime the lowest of:
Total Labour hours available/hours for one unit
or
Sales demand

With overtime the lowest of:
Total machine hours available/machine hours for one unit
Total material available/material for one unit
Sales demand

I'm assuming the 2nd constraint would be machine hours but I included all the possibilities.

KAF

sorry i just realised i missed off the top bit.

I've attached the full question now.

Pian32

Sufficient materials to manufacture = 4000 (6000/1.5)
No overtime can manufacture = 3500 (700/(12/60)
Sufficient machine time to manufacture = 3900 (130/(2/60)

Without overtime, max vloume = 3,500 (limit is labour hours)
With overtime max volume = 3,800 (limit is the demand)

Just a case of looking at the constraints and picking the lowest. If overtime is allowed then labour is no longer a constraint and the next lowest is the level of demand.