Mercury Bowie Sdn Bhd manufactures two products, the Y and the Z, which have the following standard selling price and standard costs per unit.     Y Z   RM RM Standard Selling Price 110 118 Direct Materials (RM4 per kg) 32 16 Direct Labour (RM10 per direct labour hour) 60 80 Variables Overhead (RM1 per machine hour) 4 6   During the next accounting period, the availability of resources are expected to be subjects to the following limitations:   Direct Materials 3440 kg Direct Labour Hours 2880 hours Machine capacity 2760 hours   The marketing department estimated that the maximum sales potential for product Y is limited to 420 units. There is no sales limitation for product Z. You are asked to advise how these limited facilities and resources can best be used so as to gain the optimum benefit from them.   Required:     a. Determine by graphical means the optimal mix of Y and Z at Mercury Bowie Bhd Sdn Bhd. (Calculate the exact values of Y and Z by using the equations of the lines as appropriate).                                                                                                                                                                         b. Calculate the contribution achieved by adopting the optimal mix calculated in (a) above.                                                                                      c. Critically evaluate the application of linear programming in management accounting.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Mercury Bowie Sdn Bhd manufactures two products, the Y and the Z, which have the following standard selling price and standard costs per unit.

 

 

Y

Z

 

RM

RM

Standard Selling Price

110

118

Direct Materials (RM4 per kg)

32

16

Direct Labour (RM10 per direct labour hour)

60

80

Variables Overhead (RM1 per machine hour)

4

6

 

During the next accounting period, the availability of resources are expected to be subjects to the following limitations:

 

Direct Materials

3440 kg

Direct Labour Hours

2880 hours

Machine capacity

2760 hours

 

The marketing department estimated that the maximum sales potential for product Y is limited to 420 units. There is no sales limitation for product Z. You are asked to advise how these limited facilities and resources can best be used so as to gain the optimum benefit from them.

 

Required:

 

 

a.

Determine by graphical means the optimal mix of Y and Z at Mercury Bowie Bhd Sdn Bhd. (Calculate the exact values of Y and Z by using the equations of the lines as appropriate).                                                                  

                                                                                             

 

 

 

 

b.

Calculate the contribution achieved by adopting the optimal mix calculated in (a) above.                                                                           

 

 

 

 

 

c.

Critically evaluate the application of linear programming in management accounting.                                                                                  

        

 

   

    

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