Day: October 26, 2022

A company makes three products for which details per unit are given.

• selling price – product X £18 / product Y £35 / product Z £50
• direct materials – product X £4 / product Y £5 / product Z £5
• direct labour hours – product X 0.5 hours / product Y 2 hours / product Z 2.5 hours

The direct labour rate is £8.00 per hour.

Direct labour hours are limited.

In which order should the products be ranked to achieve the maximum profit with the available labour hours?

Select ONE answer:

1. first X & next Y & last Z
2. first Y & next Z & last X
3. first Z & next X & last Y
4. first X & next Z & last Y

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct = = > X = 18 – 4 – (0.5 * 8) = £10; Y = 35 – 5 – (2 * 8) = £14; Z = 50 – 5 – (2.5 * 8) = £25 = = > X £10 / 0.5 hours = £20; Y £14 / 2 hours = £7; Z £25 / 2.5 hours = £10 = = > Therefore X then Z then Y

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