- 15 Marks
PM – May 2018 – L2 – Q5 – Strategic Management Accounting
Determine the optimal production plan for Classic Wears Plc. and calculate the total profit.
Question
Classic Wears Plc. manufactures three unique jeans wears for which the maximum
revenue for the coming year is estimated as follows:
summarised unit cost data are as follows:
The products are processed on sewing machines housed in a building of three blocks.
Block A contains type I machine which has an estimated maximum of 19,600 machine
hours available in the forthcoming year with fixed overhead cost of N980,000 per
annum.
Block B contains type II machine of which 10,000 machine hours are estimated in the
forthcoming year with a fixed overhead cost of N750,000 per annum.
Block C also contains type II machine which also has an estimate of 8,000 machine
hours available in the forthcoming year. The fixed overhead cost of N370,000 is
estimated per annum for Block C.
The required machine hours for one unit of output for each Jeans on each type of
machine are as follows:
You are required to:
a. Determine the optimal production plan which Classic Wears Limited should
adopt. (12 Marks)
b. Calculate the total profit that would be made, if the production plan in (a)
above is adopted. (3 Marks)
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