Calculate the deficiency in labour hours for the month. b) Determine the priority ranking for production. c) Calculate the maximum profit that can be made next month d) Calculate the loss of profit due to this limiting factor. e) Discuss the possible solutions for the company to avoid the loss of profit.
Covine Ltd is a company that makes three products and the variable costs are as
follows;
A B C
£ £ £
Direct materials 12 13 15
Direct labour (£12 per hour) 24 36 36
Variable overhead 1 2 2
37 51 53
The sale price of A is £42, B is £57 and C is £56. During the month of June the
availability of Direct Labour is limited to 12,000 hours due to staff taking holidays.
Sales demand is expected to be 3000 units of A, 3000 units of B and 2000 of C.
Monthly fixed costs are £20,000 and opening stocks are zero.
Calculate the deficiency in labour hours for the month.
b) Determine the priority ranking for production.
c) Calculate the maximum profit that can be made next month
d) Calculate the loss of profit due to this limiting factor.
e) Discuss the possible solutions for the company to avoid the loss of profit.
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