The following particulars are extracted from the records of a company. Particulars  Product A Product B Sale price per unit OMR 100 OMR 240 Consumption of material 4 kg 6 kg Material cost OMR20   OMR 30 Direct labour cost  30 20 Direct expenses 10 12 Machine hours used 6 4 Fixed overheads per unit OMR 10   OMR 20 Variable overheads per unit 30  40 Direct labour per hour is OMR 10. Comment on the profitability of each product [both use same raw material] when, I] total sales potential in units is limited II] total sales potential in value is limited III] raw material is in short supply IV} production capacity [in terms of machine hours] is limited. Assuming rawmaterial asthe key factor, availability of which is 20,000 kg and maximumsales potential of each product being 7000 units, find out the product mix which will yield maximum profits.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The following particulars are extracted from the records of a company.

Particulars  Product A Product B
Sale price per unit OMR 100 OMR 240
Consumption of material 4 kg 6 kg
Material cost OMR20   OMR 30
Direct labour cost  30 20
Direct expenses 10 12
Machine hours used 6 4
Fixed overheads per unit OMR 10   OMR 20
Variable overheads per unit 30  40

Direct labour per hour is OMR 10. Comment on the profitability of each
product [both use same raw material] when, I] total sales potential in units
is limited II] total sales potential in value is limited III] raw material is in
short supply IV} production capacity [in terms of machine hours] is limited.
Assuming rawmaterial asthe key factor, availability of which is 20,000 kg and
maximumsales potential of each product being 7000 units, find out the product
mix which will yield maximum profits.

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