Optimal Production Plan – NBC Institute

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

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: Optimal Production Plan

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