Machine hours are limited to 4,000. Product X: contribution £24 per unit, 4 hours, maximum demand 800 units. Product Y: £30 per unit, 3 hours, maximum demand 600. Product Z: £22 per unit, 2 hours, maximum demand 700. What is the maximum total contribution?
Answer and explanation
Correct answer: D. £38,200
- Step 1: Contribution per machine hour: X = £6; Y = £10; Z = £11, so rank Z, Y, X.
- Step 2: Z: 700 units use 1,400 hours; Y: 600 units use 1,800 hours; total 3,200, leaving 800 hours for X, enough for 200 units.
- Step 3: Contribution = 700 × £22 + 600 × £30 + 200 × £24 = £15,400 + £18,000 + £4,800 = £38,200.
Answer
£38,200.
Why not the others: £37,200: This makes X and Y to full demand, which needs 5,000 machine hours, more than the 4,000 available. £52,600: This makes the full demand for X though only 800 hours are left after Z and Y. £33,400: This leaves out the use of the remaining hours on product X.
Practise more Cost accounting techniques.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.