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PDR Co. manufactures 4 products using the same machinery. The following details relate to its 4...

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Question

Accounting

PDR Co. manufactures 4 products using the same machinery. Thefollowing details relate to its 4 products.

Product A

Product B

Product C

Product D

$ per unit

$ per unit

$ per unit

$ per unit

Selling price

28

30

45

42

Direct material

5

6

8

6

Direct labor

4

4

8

8

Variable overhead

3

3

6

6

Fixed overhead *

8

8

16

16

Profit

8

9

7

6

Labour hrs.per unit

1

1

2

2

Machine hrs.per unit

4

3

4

5

Units

Units

Units

Units

Maximum weekly demand

200

180

250

100

*Absorbed based on budgeted labor hours of 1,000 per week.

There is a maximum of 2,000 machine hours available per week

Required:

  1. Determine the production plan which would maximize the weeklyprofit of PDRCo.                                                                                                                    
  2. Prepare a profit statement showing the profit your plan wouldyield.  

Answer & Explanation Solved by verified expert
4.2 Ratings (856 Votes)

Statement Showing compution of Production plan to achieve maximum Profit
Product A Product B Product C Product D
Selling price 28 30 45 42
Direct Material 5 6 8 6
Direct Labour 4 4 8 8
Variable Overhead 3 3 6 6
Contribution Per unit (a) 16 17 23 22
Machine Hours (b) 4 3 4 5
Contribution Per Machine Hour (a/b)                            4.00                   5.67                                    5.75           4.40
Rank IV II I III
Maximum Weekly Demand © 200 180 250 100
Total Machine Hour Required (bX c) 800 540 1000 500
Machine Hour can be utilised ( Maximum 2000 Hour) (d) 540 1000 460
Unit can be Produced to Maximize the Profit ( d/b) 180 250 92
Statement Showing profit statement
Product B Product C Product D Total
Selling price 30 45 42
Direct Material 6 8 6
Direct Labour 4 8 8
Variable Overhead 3 6 6
Contribution Per unit (a) 17 23 22
No. of Unit Produced (b) 180 250 92
Total Contribution earned 3060 5750 2024 10834
Applied Fixed Overhead    1440 4000 1472 6912
Neet Profit 1620 1750 552 3922

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