Question Tag: Optimal production

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  • 15 Marks

PM – May 2024 – L2 – SC – Q7 – Cost-Volume-Profit (CVP) Analysis

Analysis of production constraints to determine optimal production levels and profit maximization using contribution analysis.

Jumbo Tailors Nigeria Limited manufactures three unique wears for which the maximum revenue for the coming year is estimated as follows:

Product Estimated Revenue (₦)
Trousers 8,250,000
Jackets 9,880,000
Skirts 12,390,000

Summarized unit cost data are as follows:

Product Direct Material (₦) Direct Labour (₦) Variable Costs (₦) Fixed Costs (₦)
Trousers 1,000 500 800 250
Jackets 900 450 1,600 500
Skirts 700 350 1,000 400

The allocation of fixed costs was derived from last year’s production level and may be reviewed if current output plans differ.

Estimated Selling Prices:

  • Trousers: ₦3,300
  • Jackets: ₦3,800
  • Skirts: ₦2,950

The products are processed on sewing machines housed in three blocks. Block A contains type I machines, with an estimated maximum machine hour capacity of 39,200 hours and a fixed overhead cost of ₦1,960,000 per annum. Block B contains type II machines, with 20,000 machine hours available and a fixed overhead cost of ₦1,500,000 per annum. Block C also contains type II machines, with 16,000 machine hours available and a fixed overhead cost of ₦740,000 per annum.

The required machine hours per unit of output for each product on each machine type are as follows:

Product Type I Machine (hours) Type II Machine (hours)
Trousers 2 3
Jackets 4 6
Skirts 6 2

Required:
a. Determine the optimal production plan which Jumbo Tailors Nigeria 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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  • 15 Marks

PM – May 2018 – L2 – Q5 – Strategic Management Accounting

Determine the optimal production plan for Classic Wears Plc. and calculate the total profit.

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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  • 20 Marks

MA – March 2023 – L2 – Q5 – Cost-volume-profit (CVP) analysis

Prepare a profit statement based on demand and propose an optimal production plan considering resource limitations and price adjustments.

The following data relates to the planned activity of three products of Parlour Plc:

Demand (units):
Tintin: 15,000
Panpan: 10,000
Sonson: 12,500
i) Due to the general rise in prices, the company envisages that labour and variable production overhead costs will rise by 20% while material costs increase by 15%. It is the policy of the firm to maintain at all times the current mark-up (to the nearest whole number) on the total variable cost for each of the three products.

ii) The following resources are available to support the production:

Material: 60,000kgs
Labour hours: 65,000 hours
iii) The three products are complements, and the company envisages that 50% of the demand for all products has to be met for any operating year.

iv) The annual fixed cost, which will not be affected by the price adjustment, is estimated at GH¢42,500.

Required:
a) Prepare a profit statement assuming the company has capacity to meet all demand and considering the needed adjustments to reflect the proposed price changes. (8 marks)

b) Based on the resource limitation and proposed adjustment, what should be the optimal production plan? (10 marks)

c) Determine the associated profit from the optimal production plan. (2 marks)

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  • 15 Marks

PM – May 2024 – L2 – SC – Q7 – Cost-Volume-Profit (CVP) Analysis

Analysis of production constraints to determine optimal production levels and profit maximization using contribution analysis.

Jumbo Tailors Nigeria Limited manufactures three unique wears for which the maximum revenue for the coming year is estimated as follows:

Product Estimated Revenue (₦)
Trousers 8,250,000
Jackets 9,880,000
Skirts 12,390,000

Summarized unit cost data are as follows:

Product Direct Material (₦) Direct Labour (₦) Variable Costs (₦) Fixed Costs (₦)
Trousers 1,000 500 800 250
Jackets 900 450 1,600 500
Skirts 700 350 1,000 400

The allocation of fixed costs was derived from last year’s production level and may be reviewed if current output plans differ.

Estimated Selling Prices:

  • Trousers: ₦3,300
  • Jackets: ₦3,800
  • Skirts: ₦2,950

The products are processed on sewing machines housed in three blocks. Block A contains type I machines, with an estimated maximum machine hour capacity of 39,200 hours and a fixed overhead cost of ₦1,960,000 per annum. Block B contains type II machines, with 20,000 machine hours available and a fixed overhead cost of ₦1,500,000 per annum. Block C also contains type II machines, with 16,000 machine hours available and a fixed overhead cost of ₦740,000 per annum.

The required machine hours per unit of output for each product on each machine type are as follows:

Product Type I Machine (hours) Type II Machine (hours)
Trousers 2 3
Jackets 4 6
Skirts 6 2

Required:
a. Determine the optimal production plan which Jumbo Tailors Nigeria 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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  • 15 Marks

PM – May 2018 – L2 – Q5 – Strategic Management Accounting

Determine the optimal production plan for Classic Wears Plc. and calculate the total profit.

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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  • 20 Marks

MA – March 2023 – L2 – Q5 – Cost-volume-profit (CVP) analysis

Prepare a profit statement based on demand and propose an optimal production plan considering resource limitations and price adjustments.

The following data relates to the planned activity of three products of Parlour Plc:

Demand (units):
Tintin: 15,000
Panpan: 10,000
Sonson: 12,500
i) Due to the general rise in prices, the company envisages that labour and variable production overhead costs will rise by 20% while material costs increase by 15%. It is the policy of the firm to maintain at all times the current mark-up (to the nearest whole number) on the total variable cost for each of the three products.

ii) The following resources are available to support the production:

Material: 60,000kgs
Labour hours: 65,000 hours
iii) The three products are complements, and the company envisages that 50% of the demand for all products has to be met for any operating year.

iv) The annual fixed cost, which will not be affected by the price adjustment, is estimated at GH¢42,500.

Required:
a) Prepare a profit statement assuming the company has capacity to meet all demand and considering the needed adjustments to reflect the proposed price changes. (8 marks)

b) Based on the resource limitation and proposed adjustment, what should be the optimal production plan? (10 marks)

c) Determine the associated profit from the optimal production plan. (2 marks)

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