Resource for Question 5 – Parts (b), (c) and (d).

Rihana provided the following information for her three products for the year ended
31 December 2017.

Aba Baba Caba

Number of units
2 000 12 000 5 000
produced and sold

$ $ $

Direct labour 17 000 21 000 13 800

Direct materials 15 000 25 000 27 000

Variable overheads 9 000 13 000 9 200

Sales revenue 40 000 60 000 80 000

$18 000 to be apportioned in the ratio of

Fixed overheads
sales revenue for each of the three products

Rihana expects no change in the selling price or the costs for the next year.
She wants to discontinue one product in order to maximise her profit.
The fixed overheads relating to the discontinued product will be shared equally by the
remaining two products.

8
P59862A