Calculate the maximum contribution and profit

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Reference no: EM133065958

Question - A manufacturing company has the following revenue and cost structure:

 

PRODUCT

 

A B C D

 

 

 

Maximum output and sales

7,500

6,000

8,200

8,500

 

$

$

$

$

Selling price per unit

25

31

45

52

Variable production costs:

 

 

 

 

Direct material

7

12

20

18

Direct labour

6

8

13

16

Overhead

4

3

5

6

Direct material per unit

4 litres

2.5 litres

2 litres

3 litres

The supply of direct material is limited to 70,000 litres. Budgeted fixed costs amount to 100,000.

Required -

1. Determine the optimal product mix.

2. Calculate the maximum contribution and profit.

3. State any five non-financial reasons that can be considered by management in a 'make or buy' decision.

4. Give any three uses of marginal costing in management decision making.

Reference no: EM133065958

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