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exam Sep 2016,Q#32 CSC co,part a(resulting optimum production plan and the total profit for next month)
i totally dont get it,please sir help me understand it,i shall be much obliged,ThanksI do want to help you, but you are going to have to be more specific as to which bit(s) of the answer are not clear to you (otherwise all I will end up doing is effectively typing out the examiners answer 🙂 )
Essentially the problem is a key factor analysis question (and if you have not watched my lectures on this, then do). There is one limited resource (Betta) – they do not have enough supply to be able produce to meet the demand. Therefore to decide where to best use the limited supply, we calculate the contribution per unit of the limited resource and rank the products on this basis.
Again, please do watch the free lectures (it is the first part of the lecture on the chapter on throughput accounting), and do ask you then have problems on any specific parts of the examiners answer.
thank you sir,i actually got this but the part which i didnt understand is when he is calculating profit in ranking he ranked cookies as 1st cakes as 2nd shakes as 3rd and shakes(contract)as 4th one ,then why did he produce shakes(contract) 1st(showing demand 5000 why not 7500(5000+2500)) and why did he produce cookies and cake 2nd and 3rd and also he wrote the demand for cakes 10080 instead of 12000
((Step 3) Optimum production plan
Product Number Grams Total Cumulative Cont Total
to be per per grams per grams per unit contribution
produced unit product
Shakes(contract) 5,000 1 5,000 5,000 1·00 5,000
Cookies 9,800 0·20 1,960 6,960 1·75 17,150
Cakes 10,080 0·5 5040 12,000 2·60 26,208
–––––––
Total contribution 48,358
Less fixed costs (3,000)
–––––––
Profit 45,358
––––––)this one i dont understand
🙁Before anything else they have no choice but to produce the 5,000 shakes, because they have signed a contract.
That leaves them with 7,000 grams and they will use this in order of the rankings. So they produce as many cookies as they can (they have enough to produce up to the full demand).
That leaves them with only 5,040 grams, which is why they are only able to produce 10,080 cakes.The fixed costs will, of course, be $3,000 whatever they end up producing.
Again, I do suggest that you watch my free lectures on key factor analysis – I cannot type out the whole lecture here 🙂
i have watched your lectures sir i took whole prep from you,Thank you so much sir for helping me understand this issue 🙂
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