Page 263 - BA2 Integrated Workbook - Student 2017

Answers to supplementary objective test questions

13.4 D

When determining the production plan that will maximise the company's profit
next period, the company's products should be ranked according to their
contribution per unit of limiting factor.

Firstly we have to determine the limiting factor.

Labour hours required = (500 × 2.5) + (1,200 × 4) + (800 × 3) = 8,450 hours

Kg of material X required = (500 × 3.5) + (1,200 × 1.5) + (800 × 2) = 5,150 kg

There are 9,000 labour hours available therefore this is not limiting. There are
only 5,000 kg of material X available therefore material X is the limiting factor.

CHAPTER 14 – LONG-TERM DECISION MAKING

14.1 The payback period is 3 years 4 months.

$500,000/$150,000 = 3 years + (0.33 × 12) months

= 3 years 4 months.

14.2 IRR = 5.4%

H = 10%

L = 5%

NH = $(173,500)

NL = $15,150

15,150
IRR = 5 + ––––––––––––––– × (10 – 5)
15,150 – (173,500)

= 5.4%

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