AtomicTurtle
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Earn products Ltd manufactures three products. The following budgeted figures have been prepared:

Product S T U
Budgeted Output( units) 1000 800 1200

Standard Unit Cost:
Material 40 60 30
Labour 20 30 25
Variable Overhead 15 10 15
Fixed Overhead 15 12 15

Selling Price 100 120 90

Included in the costs for each product is labour. After preparations of the budget, you are informed by Earn products Ltd that only 7000 hours of labour were avaliable.


Standard Usage per Unit of Labour.
S T U
2 3 2.5

The finance director is considering making production choices based on contribution to sales but is unsure if this is the correct approach.


You are required to:

A) Calculate the number of units of each product which should be produced and sold to maximise profit.

B) Produce and present the profit statement

C) Briefly explain why this approach will result in maximum profit.
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TSR Learn Together
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Hi there,

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MahmoodReza
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It's a limiting factor scenario - use a marginal costing approach http://www.proactiveresolutions.com/...-and-revenues/
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