A company produces two produces two products (product A&B) and is currently planning itsproduction mix for the next operating period. The maximum demand of product A is 2,000 unitswhiles that of product B is also 2,000 units however, the total raw materials required for producingboth products is only 60,000kg. The estimated cost, sales and production data of the two products aregiven below:PRODUCT (A)PRODUCT (B)GHCGHC140.00Direct material:@GHØ10per kgDirect labor:@GHC30per hour90.00Fixed Overhead20.0020.00Variable overhead:@GHØ40 per hour80.00120.00Total cost per unit400.00370.00Add profit50.0030.00Selling price per unit450.00400.00Assuming you are the management accountant of this company, advice management on the mostprofitable mix.240.0060.001

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Business

Accounting

suming you a ofitable mix. are the management accountant of this company, advice management on the most

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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Question

A company produces two produces two products (product A&B) and is currently planning its
production mix for the next operating period. The maximum demand of product A is 2,000 units
whiles that of product B is also 2,000 units however, the total raw materials required for producing
both products is only 60,000kg. The estimated cost, sales and production data of the two products are
given below:
PRODUCT (A)
PRODUCT (B)
GHC
GHC
140.00
Direct material:@GHØ10per kg
Direct labor:@GHC30per hour
90.00
Fixed Overhead
20.00
20.00
Variable overhead:@GHØ40 per hour
80.00
120.00
Total cost per unit
400.00
370.00
Add profit
50.00
30.00
Selling price per unit
450.00
400.00
Assuming you are the management accountant of this company, advice management on the most
profitable mix.
240.00
60.00
1

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