ower product Limited makes and sells three types of electronic security systems for which the following information is available Standard cost and selling price per unit Day Scan Night scan Omni scan GH¢ GH¢ GH¢ Material 70 110 155 Manufacturing labour 40 55 70 Installation labour 24 32 44 Variable overheads 16 20 28 Selling price 250 320 460 Fixed cost for the period are GH¢450,000 and installation labour, which is highly skilled is available for 25,000 hours only in a period and is paid GH¢8 per hour. Both manufacturing and installation labour are variable cost. The maximum demand for the period is: Day scan 2,000 units; Night scan 3,000 units; Omni scan 1,800 units. Calculate the shortfall (if any) in hours of installation labour. Determine the best production plan assuming the company wishes to maximize profit calculate the maximum profit that could be achieved from the plan in part (b) above Having carried out an investigation of the availability of installation labour, the firm thinks that by offering GHS 12 per hour, additional installation would become available and thus overcome the labour shortage. Based on the result obtained above, you are required to advice the firm whether or not to implement this proposal

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Power product Limited makes and sells three types of electronic security systems for which the following information is available

Standard cost and selling price per unit

	Day Scan	Night scan	Omni scan
	GH¢	GH¢	GH¢
Material	70	110	155
Manufacturing labour	40	55	70
Installation labour	24	32	44
Variable overheads	16	20	28
Selling price	250	320	460

Fixed cost for the period are GH¢450,000 and installation labour, which is highly skilled is available for 25,000 hours only in a period and is paid GH¢8 per hour. Both manufacturing and installation labour are variable cost. The maximum demand for the period is: Day scan 2,000 units; Night scan 3,000 units; Omni scan 1,800 units.

Calculate the shortfall (if any) in hours of installation labour.
Determine the best production plan assuming the company wishes to maximize profit
calculate the maximum profit that could be achieved from the plan in part (b) above
Having carried out an investigation of the availability of installation labour, the firm thinks that by offering GHS 12 per hour, additional installation would become available and thus overcome the labour shortage. Based on the result obtained above, you are required to advice the firm whether or not to implement this proposal.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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