How many of each type of engine should be produced

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Reference no: EM133065777

JOINT COST ALLOCATION AND PRODUCT MIX DECISIONS

Question 1: Mount Franks manufactures 2 drinking products from a joint water process. The two products are Still Water and Mineral Water. A standard production run incurs joint costs of $40 000 and results in 60 000 litres of still water and 90 000 litres of mineral water. Each still water litre sells for $1.50, and each mineral litre sells for $3.00.
Required:
Calculate the amount of joint costs allocated to "still water" and "mineral water" using the physical units method and relative sales value method

Question 2: In addition to the data given in the example 1, assume that the still water can be processed further at a cost of $60000 to produce fruit flavoured water. This can then be sold for $3.00 per litre. While the mineral water can be processed at a cost of $80000 to produce sparkling mineral water that can be sold for
$4.00 per litre.

Using the net realisable value method to calculate the joint cost assigned to each product?

Question 3: Company A provides the following information for product P and Q with limited machine hours available.

	Product P	Product Q
Selling price/unit	$80	$120
Total variable costs/unit	$50	$70
Contribution margin/unit	$30/unit	$50/unit
Machine hrs/unit	2hrs	5 hrs
Contribution margin/ mhr	$15/mhr	$10/mhr

The company has received two orders in regard to product P and Q respectively. With the limited machine hrs, which product order should be filled first so as to maximize the total profits? P or Q?

Question 4: Power Tool manufactures engines for commercial and consumer products. It assembles two engines: engine A and B. Following is information for each product line:

	Engine A	Engine B
Selling price	$800	$1000
Variable cost per unit	560	625
Contribution margin per unit	240	375

Engine A require 2 machine hrs each and engine B require 5 machine hrs each. Only 600 machine hours are available each day for assembling engines. Additional capacity cannot be obtained in the short run. Power tools only has demand for 200 engine A per day but can sell as many engine B as it produces.

Required: 1) How many of each type of engine should be produced to maximize the total contribution margin? 2) Calculate the contribution margin at the optimal solution.

Question 5: Company A produces two products X and Y with contribution margins of $30 and $25 respectively. The company has a maximum of 1200 machine hours and 3000 labour hours per month.

Product X requires 1 machine hour per unit while product Y requires 2 machine hours per unit. Product X requires 3 direct labour hours per unit while product Y requires 2 direct labour hours per unit.

Determine the number of product X and Y to be produced to maximise the company's profits each month?

Question 6: A firm's two products are both produced on a single machine. Product X requires 3 machine hours per unit while Product Y requires 6 machine hours per unit. There is a maximum of 24000 machine hours available. There is also a limit of 12000 hours of supervision time available, with both products requiring 2 hours of supervision per unit. Details concerning the unit selling price and unit costs of each product are shown below:

Product X Y
Selling price $30 $35
Variable costs $24 $27

How many units of each product should be produced and sold?

Reference no: EM133065777

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