Question 3
ICAN
•
2025
•
PERFORMANCE MANAGEMENT
•
mixed
Case Stimulus
Twins Nig. Ltd, a company based in Aba, produces industrial vanish. The selling prices and associated unit variable costs for vanish Grade A and Grade B are shown below:
Grade A Grade B
N N
Selling price 2,100 1,500
Material X (N240 per kg) 480 240
Skilled labour (N144 per hour) 720 288
Unskilled labour (N60 per hour) 120 180
Variable overhead (N84 per machine hour) 168 338
The fixed overhead cost is N600,000 per month and the company plans to maximise profits.
Available resources for the following month is as follows:
Material X 2,500 kg
Skilled labour 4,800 hours
Unskilled labour 3,900 hours
Machine hours 5,000 hours
Additional Information
{
"label": "Supporting information 1",
"content": "| | Grade A | Grade B |\n|----------------|---------|---------|\n| Selling price | 2,100 | 1,500 |\n| Material X (₦240 per kg) | 480 | 240 |\n| Skilled labour (₦144 per hour) | 720 | 288 |\n| Unskilled labour (₦60 per hour) | 120 | 180 |\n| Variable overhead (₦84 per machine hour) | 168 | 338 |"
}
{
"label": "Supporting information 2",
"content": "| Available resources for the following month |\n|---------------------------------------------|\n| Material X | 2,500 kg |\n| Skilled labour | 4,800 hours |\n| Unskilled labour | 3,900 hours |\n| Machine hours | 5,000 hours |"
}
Requirements
(
b
)
Management is now considering negotiating overtime work with both the skilled and unskilled labour. Advise management what maximum amount should be offered per hour of overtime, separately, for skilled labour and for unskilled labour. (Show calculations).
(
c
)
Assume that the company has the choice of producing either Grade A of the vanish or Grade B, but not both. Calculate which Grade of the vanish should be produced in order to maximise contribution. What quantity should be produced and the resulting total contribution?
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About This Question
This is
Ican
2025
Performance Management
Question 3.
It is one of the
mixed
questions from the
2025
Ican
Performance Management
examination.