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Question: q3 a within the context of the manufacturing environment explain...

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Q.3 (a) Within the context of the manufacturing environment, explain the terms (i) Relevant cost (ii) Opportunity cost (iii) Contribution to profit (6 marks) (b) The Engineering Manager in ABC Ltd is responsible for maximising the profit from three product lines X, Y and Z. He/she has been provided with the following information Direct materials (E) Direct labour (hrs) Fabrication Assembly Finishing Selling price per unit (E) 100 85 120 4 2 3.75 550 210 3.5 2 3.5 480 220 3.75 4 625 180 Budgeted production (in units) Additional information is also provided There are no closing stocks The maximum sales achievable for each product in the period is 230 units The labour rate for fabrication and finishing is £13.50/hr. The labour rate for assembly work is £12.00/hr > The skilled labour required for the assembly process is in short supply although there is just enough to meet the current budgeted production Required () Prepare a statement showing the contribution from each product based on the budgeted production (6 marks) (ii) Calculate the contribution per unit of limiting factor (2 marks) (ii) Prepare a statement showing the maximum total contribution that can be obtained. Explain your rationale (6 marks)

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