Shoes Ltd. manufactures three items: Sneakers, Takkies and Sandals. The table below contains information regarding these products: Sneakers (R/ unit) Takkies (R/ unit) Sandals (R/ unit) Material cost 60 75 40 Labour cost 24 68 42 Variable overhead cost 7 12 16 Fixed overhead cost 36 23 11 Selling price per unit 870 990 650 Volume of production 12 000 28 500 31 200 Fixed overheads are allocated to products based on direct labour hours. Direct labour hours are constrained and therefore limited to 140 000 hours. The direct labour rate is R25 per hour. w Required: Q.3.1 Calculate the contribution margin per labour hour and then rank the products in order of profitability. Q.3.2 Calculate the number of units of each product that needs to be manufactured to

Practical Management Science
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Shoes Ltd. manufactures three items: Sneakers, Takkies and Sandals. The table below contains
information regarding these products:
Sneakers (R/ unit)
Takkies (R/ unit)
Sandals (R/ unit)
Material cost
60
75
40
Labour cost
24
68
42
Variable overhead cost
7
12
16
Fixed overhead cost
36
23
11
Selling price per unit
870
990
650
Volume of production
12 000
28 500
31 200
Fixed overheads are allocated to products based on direct labour hours.
Direct labour hours are constrained and therefore limited to 140 000 hours.
The direct labour rate is R25 per hour.
w
Required:
Q.3.1
Calculate the contribution margin per labour hour and then rank the products in
order of profitability.
Q.3.2 Calculate the number of units of each product that needs to be manufactured to
Transcribed Image Text:Shoes Ltd. manufactures three items: Sneakers, Takkies and Sandals. The table below contains information regarding these products: Sneakers (R/ unit) Takkies (R/ unit) Sandals (R/ unit) Material cost 60 75 40 Labour cost 24 68 42 Variable overhead cost 7 12 16 Fixed overhead cost 36 23 11 Selling price per unit 870 990 650 Volume of production 12 000 28 500 31 200 Fixed overheads are allocated to products based on direct labour hours. Direct labour hours are constrained and therefore limited to 140 000 hours. The direct labour rate is R25 per hour. w Required: Q.3.1 Calculate the contribution margin per labour hour and then rank the products in order of profitability. Q.3.2 Calculate the number of units of each product that needs to be manufactured to
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