| Profit Maximisation - Exercise 3.37 | Unnamed: 1 | Unnamed: 2 | Unnamed: 3 | Unnamed: 4 | SOLUTION |
|---|---|---|---|---|---|
| (a) (i) | Contribution per Unit | Standard | DeLuxe | Excell | Total |
| Total Sales Value | 75000 | 150000 | 250000 | ||
| Less Variable Costs | |||||
| Cane | 30000 | 45000 | 80000 | ||
| Other Materials | 2000 | 3000 | 8000 | ||
| Labour | 20000 | 25000 | 55000 | ||
| Variable Overheads | 5000 | 5000 | 7000 | ||
| 57000 | 78000 | 150000 | |||
| Total Contribution | 18000 | 72000 | 100000 | ||
| Sales (units) | 5000 | 7500 | 10000 | ||
| Contribution per Unit | 3.6 | 9.6 | 10 | ||
| (b) | Total Contribution | ||||
| Total Contribution | 18000 | 72000 | 100000 | 190000 | |
| Less Fixed Overheads | 10000 | 15000 | 15000 | 40000 | |
| Total Expected Profit | 150000 | ||||
| (c) | Budgeted Cost of Cane per Hamper | ||||
| Total Cost of Cane | 30000 | 45000 | 80000 | ||
| Sales (units) | 5000 | 7500 | 10000 | ||
| Budgeted Cost of Cane per Hamper | 6 | 6 | 8 | ||
| (d) | Contribution per £ of Cane Costs | ||||
| Contribution per Unit | 3.6 | 9.6 | 10 | ||
| Budgeted Cost of Cane per Hamper | 6 | 6 | 8 | ||
| Contribution per £ of Cane Costs | 0.6 | 1.5999999999999999 | 1.25 | ||
| (e) | Order of Preference | 3 | 1 | 2 | |
| (f) | Cost of Cane | ||||
| (£30000 + £45000 + £80000) x 80% | 124000 | ||||
| Less Products Made | |||||
| All of DeLuxe | 45000 | ||||
| 79000 | |||||
| Allocated to Excell | 79000 | ||||
| 0 | |||||
| No Cane is left to make any of the Standard Hamper and there is a reduction in the | |||||
| number of Excell Hampers to be made. | |||||
| Excell Hampers = £79000 / £8 = 9875 Units only | |||||
| Maximum Contribution | |||||
| DeLuxe (£9.60 x 7500 Units) | 72000 | ||||
| Excell (£10.00 x 9875 Units) | 98750 | ||||
| Maximum Contribution | 170750 | ||||
| Less Fixed Overheads | 40000 | ||||
| Maximum Profit | 130750 | ||||
| (g) | Material Available | 124000 | |||
| Less Standard Model (£6 x 1000 Units) | 6000 | ||||
| Less DeLuxe Model (£6 x 7500 Units) | 45000 | 51000 | |||
| Available for Excell Model | 73000 | ||||
| Excell Hampers = £73000 / £8 = 9125 Units only | |||||
| Maximum Contribution | |||||
| Standard (£3.60 x 1000 Units) | 3600 | ||||
| DeLuxe (£9.60 x 7500 Units) | 72000 | ||||
| Excell (£10.00 x 9125 Units) | 91250 | ||||
| Maximum Contribution | 166850 | ||||
| Less Fixed Overheads | 40000 | ||||
| Maximum Profit | 126850 | ||||
| Reduction in Profit (£130750 - £126850) | 3900 | ||||
| (f) (ii) | |||||
| (f) (iii) |