Question 3

A B
Contribution per Unit 40 40
Machine hours 2 1.5
Contribution per MH 20 27
Preference 3 1

Direct Expenses 80 60

For 12,000 hours available

Product Total Requirement
B 3,500
C 2,000
A 3,000

Preference for a particular product can be given, if there

Demand exists for all the products, parallelly produce al

Product A B
Units to be sold 1,375 3,500
Contribution 40 40
Total Contribution 55,000 140,000
Fixed Cost
Loss
For Decision making, Fixed Cost to be considered
Fixed Cost per Unit = Total Fixed Cost for the plan
Fixed Cost per Unit = Total Fixed Cost for the prod
Planned Capacity means maximum possible
Fixed Cost
Fixed Cost per Unit
A 40
B 40
C 30
D 50

Balance units of A
Total Requirement
Already Produced units
units to be produced in new shift
Revised Contribution
Existing Contribution 40
Revision in Wages 12

Depreciation
Maintenance
Power

Hours required = 1,625 Units of product A X 2

 Existing Loss without Extra Shif
Contribution from Additional U
Additional Fixed Cost

750 Hours extra

Sale price to be increased

Existing Available Capacity is utilised
Only profitable products are produced
Products are chosen based on Highest Contr
Additional Shift (Additional capacity) is also
Reducing the Fixed Cost is not tried
Rework on Employee Cost & Be
Make the Salary unit based
Outsource most of the activity
Try for additional revenue from
 C D Constraint :: Machin
50 (10) Contribution per Co
2 2
25 (5)
2 Abandon

80 80

12000
Hours Hours required Balance hours
1.5 5,250 6,750 Full Productio
2 4,000 2,750 Full Productio
2 6,000 Production to
3,250 2,750 / 2 hour
n be given, if there is no specific demand
arallelly produce all positive contribution products

C D
2,000 Nil
50
100,000 295,000
470,000
(175,000)
st to be considered in Total
d Cost for the plant / Planned Capacity 4,70,000 / 11,500 Un
d Cost for the product / Planned Capacity of Product
maximum possible Units 40.869565

er Unit Planned Units Total Fixed Cost

3,000 120,000
3,500 140,000
2,000 60,000
3,000 150,000
11,500 470,000

3,000
1,375
1,625
28 45,500

20% on 60

Additional Fixed Cost

reciation Every 1,000 Hours = 6,000
ntenance 2 Hours = 6,000
102 Hours = 6,000
998 Hours = 6,000
its of product A X 2 Machine hours = 3,250 Hours
4 X 1000 Hours = 4 X 6000 = 24,000
 without Extra Shift (175,000)
from Additional Units of A 45,500
ixed Cost (24,000)

(153,500)

Product B 500 Units X Revised Contribution 24

ty is utilised
are produced
d on Highest Contribution per Machine Hour
nal capacity) is also tried
s not tried
mployee Cost & Benefit Time & Motion Study
ary unit based
ost of the activity
ional revenue from existing resources
raint :: Machines hours
ibution per Contraint (Machine Hour)

Full Production
Full Production
Production to the extent of 2,750 hours
2,750 / 2 hours = 1,375 Units
00 / 11,500 Units
bution 24