Goodevening,

Ardennes limited makes and sells two products A and B, each of which passes through the same automated production operations. The following estimated information is available for period 1:
(i) Product unit data: A B
Selling price per unit (ZMW) 60 70
Direct material cost (ZMW) 2 40
Variable production overhead cost (ZMW) 28 4
Overall hours per product unit (hours) 0•25 0•15
(ii) Budgeted production/sales of products A and B are 120,000 units and 45,000 units respectively. The selling prices per unit for A and B are ZMW60 and ZMW70 respectively.
(iii) Maximum demand for each product is 20% above the budgeted sales levels.
(iv) Total fixed production overhead cost is ZMW1,470,000. This is absorbed by products A and B at an average rate per hour based on the estimated production levels.
One of the production operations has a maximum capacity of 3,075 hours that has been identified as a bottleneck that limits the overall production/sales of products A and B. The bottleneck hours required per product unit for products A and B are 0•02 and 0•015 respectively.
Required:
i. State Any two ways of exploiting a bottleneck. (2 marks)
ii. Calculate the mix (units) of products A and B that will maximise net profit and the value (ZMW) of the maximum net profit. (9 marks)
iii. Briefly explain how planning can improve performance measurement and management.
(4 marks)