(a) Prepare a statement which will enable you to advise management on the most profitable production pattern to pursue. (b) Mention briefly the matters which should receive the attention of management when confronted with the type of situation described above.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
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Chapter5: Process Costing
Section: Chapter Questions
Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...
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Industrial Fitments Ltd produce three types of shelving ('Factory', 'Stores' and
"Office'), which are made from the same basic material (i.e., mild steel) which costs
K100 per square metre. The standard unit cost of the three products are as follows:
Factory
Store
Office
K
K
K
Direct materials:
Mild steel
84
78
75
Attachments
14
25
30
Direct labour:
Machining
10
15
19
Spraying
4
7
Unit selling prices are
175
186
190
Sales expectations for the forthcoming month are:
Units
Factory
2,000
Stores
2,400
Office
1,600
Owing to an industrial dispute, suppliers of mild steel have intimated that they will be
able to supply only 2,500 square metres during the month.
Required
(a) Prepare a statement which will enable you to advise management on the most
profitable production pattern to pursue.
(b) Mention briefly the matters which should receive the attention of management
when confronted with the type of situation described above.
Transcribed Image Text:Industrial Fitments Ltd produce three types of shelving ('Factory', 'Stores' and "Office'), which are made from the same basic material (i.e., mild steel) which costs K100 per square metre. The standard unit cost of the three products are as follows: Factory Store Office K K K Direct materials: Mild steel 84 78 75 Attachments 14 25 30 Direct labour: Machining 10 15 19 Spraying 4 7 Unit selling prices are 175 186 190 Sales expectations for the forthcoming month are: Units Factory 2,000 Stores 2,400 Office 1,600 Owing to an industrial dispute, suppliers of mild steel have intimated that they will be able to supply only 2,500 square metres during the month. Required (a) Prepare a statement which will enable you to advise management on the most profitable production pattern to pursue. (b) Mention briefly the matters which should receive the attention of management when confronted with the type of situation described above.
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