- 1 Hague Co Hc Manufactures And Sells Pool Cues And Snooker Cues The Cues Both Use The Same Type Of Good Quality Wood 1 (86.61 KiB) Viewed 18 times
- 1 Hague Co Hc Manufactures And Sells Pool Cues And Snooker Cues The Cues Both Use The Same Type Of Good Quality Wood 2 (35.14 KiB) Viewed 18 times
1. Hague Co (HC) manufactures and sells pool cues and snooker cues. The cues both use the same type of good quality wood (ash) which can be difficult to source in sufficient quantity. The supply of ash is restricted to 8,100 kg per period. Ash costs £60 per kg. The cues are made by skilled craftsmen (highly skilled labour) who are well known for their workmanship. The skilled craftsmen take years to train and are difficult to recruit. HC's craftsmen are generally only able to work for 18,000 hours in a period. The craftsmen are paid £27 per hour. HC sells the cues to a large market. Demand for the cues is strong, and in any period, up to 15,000 pool cues and 12,000 snooker cues could be sold. The selling price for pool cues is £67 and the selling price for snooker cues is £100. Manufacturing details for the two products are as follows: Pool cues Snooker cues Craftsmen time per cue 0.75 hours 1.25 hours Ash per cue 405 g 405 g Other variable costs per cue £2.45 £1.95 HC does not keep inventory. Required: a) Calculate the contribution earned from each cue. (2 marks) b) Determine the optimal production plan for a typical period assuming that HC is seeking to maximise the contribution earned. You should produce a graph and solve using linear programming and simultaneous equations. (15 marks) c) Explain why limiting factor analysis is not used by HC. Explain whether linear programming would still be useful if HC added another product into the mix. (3 marks) (2 marks) d) Explain the meaning of a shadow price (dual price) (3 marks) e) Calculate the shadow price for one hour of labour. (total 25 marks)
3. Dronach, an 80% subsidiary of Trollhattan PLC set up on 1 January 2016, prepares its accounts in the currency 'Dollar DS'. The financial statements of Dronach as at 31 December 2016 are given as follows:
Statement of Financial Position as at Dronach Dronach Dollar DS 31 December 2016 Dollar DS Fixed assets 3,600,000 Less accumulated depreciation (800,000) Net book value 2,800,000 Current assets Inventory 8,000,000 Other net current assets 2,200,000 10,200,000 Long term liabilities 8% debentures (6,000,000) 7,000,000 Share capital 5,000,000 Profit for the year 2,000,000 7,000,000 Income
Statement for the year ended 31 December 2016 Turnover Cost of sales Opening inventory Purchases Closing inventory Gross profit Dronach Dollar DS 7,200,000 7,000,000 (8,000,000) (300 000 Dronach Dollar DS 12,000,000 (6,200,000) 5,800,000