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Question 2( 25 Marks)

Part A (13 Marks)

Gildan Limited is a clothing manufacturer specializing in sustainable ladys fashion. The company has been in operation for ten years and during that time has built up a loyal and expanding customer base. Gildan Limited has three signature lines, Tops (shirts and Blouses), Bottoms (skirts and pants) and a Suits, all produced from organically grown and dyed linen fabric. Successful marketing and sales of these garments has resulted in the company exceeding full capacity at its current manufacturing base in Newton. Consequently, the directors are considering expanding production capacity over the next few years and are examining a number of possibilities. However, for the current year the company has a total of 15,000 machine hours and 20,000 direct labour hours available for production at its Newton manufacturing base. Production and sales details relating to the signature garments are shown below:

	Tops	Bottoms	Suits
Direct material (linen) @$6 per meter	1.5 m	1.25 m	2.5 m
Direct labor@ $12per hour	0.25 hrs	0.25 hrs	0.5 hours
Variable overhead @ 150% of direct labor cost
Machine hours required	0.3 hrs	0.2hrs	0.25 hrs
Sales demand units (annual)	30,000	18,000	15,000
Selling price per unit	$ 54.00	$80.00	$105.00

Additional Information

Budgeted fixed manufacturing overheads per month $ 95,200

Budgeted selling and administrative cost per month $42,500

Required.

1. Based on the information provided, state whether Gildan Ltd has sufficient production capacity to satisfy sales demand for the coming year. (provide computations) (3 Marks)

2. Compute the optimal production plan for Gildan Ltd for the current year, clearly showing total profit expected. (10 marks)

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