Limiting Factor – NBC Institute

PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

Question

PQR Plc is preparing its budgets for the upcoming year and has forecasted two demand scenarios for its product range:

You are to assume only one forecast (either Forecast 1 or Forecast 2) will be selected. The expected variable unit costs for each product are:

The general fixed costs are budgeted at ₦20,000 for the year, with no specific fixed costs expected per product. Additionally, all three products use the same direct material, with a limited supply of 22,020 kgs available for the budget year.

Required:
a. Recommend, with supporting calculations, whether forecast 1 or forecast 2 should be adopted for the budget period. (11 Marks)
b. Prepare a report, addressed to the managing director, to explain the budget preparation process, with particular reference to: i. The principal budget factor (3 Marks)
ii. The budget manual (3 Marks)
iii. The role of the budget committee (3 Marks)

Answer

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Tags: Budgeting, Contribution analysis, Forecast Selection, Limiting Factor, Production Optimization
Level: Level 2

Topic: Budgeting and Budgetary Control, Decision-making techniques
Series: MAY 2021

MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Question

Unity Company Ltd is preparing for next season’s operations. The company has provided the following information relating to its three products:

	TO	GE	DA
Selling Price	GH¢18.5	GH¢16.2	GH¢12.6
Material Cost (@ GH¢1.75 per kg)	GH¢8.75	GH¢10.5	GH¢3.5
Labour Cost (@ GH¢2.2 per labour hour)	GH¢7.7	GH¢4.4	GH¢7.7
Annual Demand	2,150 units	3,235 units	1,556 units

The company can only make available a total of 18,560 hours in the short run.

Required:

i) Provide the optimal production plan for Unity Ltd for the ensuing period.
(5 marks)

ii) What is the total incremental benefit of producing DA instead of GE, assuming available resources can only meet the demand for DA?
(3 marks)

iii) Indicate the shadow price of the production plan and state the basic assumption under which this price will apply.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Decision Making, Incremental Benefit, Limiting Factor, Optimal Production Plan, Shadow Price
Level: Level 2

Topic: Decision making techniques, Divisional Performance, Relevant Cost and Revenue
Series: MAY 2016

PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

Question

PQR Plc is preparing its budgets for the upcoming year and has forecasted two demand scenarios for its product range:

You are to assume only one forecast (either Forecast 1 or Forecast 2) will be selected. The expected variable unit costs for each product are:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Contribution analysis, Forecast Selection, Limiting Factor, Production Optimization
Level: Level 2

Topic: Budgeting and Budgetary Control, Decision-making techniques
Series: MAY 2021

MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Question

Unity Company Ltd is preparing for next season’s operations. The company has provided the following information relating to its three products:

	TO	GE	DA
Selling Price	GH¢18.5	GH¢16.2	GH¢12.6
Material Cost (@ GH¢1.75 per kg)	GH¢8.75	GH¢10.5	GH¢3.5
Labour Cost (@ GH¢2.2 per labour hour)	GH¢7.7	GH¢4.4	GH¢7.7
Annual Demand	2,150 units	3,235 units	1,556 units

The company can only make available a total of 18,560 hours in the short run.

Required:

i) Provide the optimal production plan for Unity Ltd for the ensuing period.
(5 marks)

ii) What is the total incremental benefit of producing DA instead of GE, assuming available resources can only meet the demand for DA?
(3 marks)

iii) Indicate the shadow price of the production plan and state the basic assumption under which this price will apply.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Decision Making, Incremental Benefit, Limiting Factor, Optimal Production Plan, Shadow Price
Level: Level 2

Topic: Decision making techniques, Divisional Performance, Relevant Cost and Revenue
Series: MAY 2016

Question Tag: Limiting Factor

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PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

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PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

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MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

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PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control

Recommend the appropriate forecast for PQR Plc, analyze the limiting factor, and explain the budgeting process.

You're reporting an error for "PM – May 2021 – L2 – Q2 – Budgeting and Budgetary Control"

MA – May 2016 – L2 – Q5b – Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

Decision Making Techniques, Relevant Cost and Revenue, Divisional Performance

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