RO. 1 erial 2 kg RO. 1 RO. 1 RO. E 3

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following particulars are extracted from the records of a company.
Product A
Product B
Sales (per unit)
RO. 100
RO. 120
Consumption of material
Material cost
2 kg
3 kg
RO. 10
RO. 15
Direct wages cost
RO. 15
RO. 10
Direct expenses
RO. 5
RO. 6
Machine hours used
3
Overhead expenses:
Fixed
10
Variable
15
20
Direct wage per hour is RO.5.
Comment on the profitability of each product (both use the same raw material) when:
(i)
Total sales potential in units is limited
Production capacity (in terms of machine hours) is the limiting factor.
Material is in short supply
(ii)
(iv)
Sales potential in value is limited.
Transcribed Image Text:The following particulars are extracted from the records of a company. Product A Product B Sales (per unit) RO. 100 RO. 120 Consumption of material Material cost 2 kg 3 kg RO. 10 RO. 15 Direct wages cost RO. 15 RO. 10 Direct expenses RO. 5 RO. 6 Machine hours used 3 Overhead expenses: Fixed 10 Variable 15 20 Direct wage per hour is RO.5. Comment on the profitability of each product (both use the same raw material) when: (i) Total sales potential in units is limited Production capacity (in terms of machine hours) is the limiting factor. Material is in short supply (ii) (iv) Sales potential in value is limited.
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