Answer Happy

Question 1:
Other Cloth Limited (OCL) makes and supplies two products to retailers around the world. Two of the products – the “cloak” and “robe” – require the same resources but in different quantities. Given below are details of the forecast revenues and costs as well as planned resource requirements for the two products.
Product
Cloak
Robe
Selling Price (£)
Resource usage:
Direct Materials (£50 per sq. meter) Direct Labour (£30 per hour) Variable machine cost (£15 per hour) Fixed Costs*
Profit
70
120
Resource per unit
Cost per Quantity cloak per cloak
Cost per robe
Quantity per robe
£50 £30 £15
£ 20 12 5 11.50 21.50
£ 0.40 30 0.40 20 0.33 15
22.50
32.50
0.60 0.67 1.00
page1image42685696 page1image42685888 page1image42686080 page1image42686272The company’s budget has already been prepared. This was based on production and sales of 40,000 “cloaks” and 52,500 “robes”.
In response to rumours of potential shortages in resources the company is reviewing its operational plans to determine the most profitable course of action.The following resource constraints are expected:
*Fixed costs are based on meeting the budget.
page1image42686464 page1image42686656Direct materials Direct labour Machine
Maximum available
50,000 square meters 60,000 hours 50,000 hours
Required:
(a) Based on the current planned production quantities and selling prices, advise OCL (presenting suitable calculations) on the most profitable product mix (with limited resources). (50% of marks)
(b) Briefly explain “Linear Programming” and state what assumptions are included with respect the accounting data used to calculate it. (20% of marks)
(c) Management decides to reduce the selling price to Cloaks £60, and Robes £105. This is expected to increase the demand of each product by 15%. State the constraints and objective function that would enable a solution with the reduced selling price and increased demand (using Linear Programming). Note: You are not required to solve or draw the graph. (30% of marks)
(Total: 100 marks)
Other Cloth Limited (OCL) makes and supplies two products to retailers around the world. Two of the products - the "cloak" and "robe" - require the same resources but in different quantities. Given below are details of the forecast revenues and costs as well as planned resource requirements for the two products. The company's budget has already been prepared. This was based on production and sales of 40,000 "cloaks" and 52,500 "robes". In response to rumours of potential shortages in resources the company is reviewing its operational plans to determine the most profitable course of action. The following resource constraints are expected: Required: (a) Based on the current planned production quantities and selling prices, advise OCL (presenting suitable calculations) on the most profitable product mix (with limited resources). (50\% of marks) (b) Briefly explain "Linear Programming" and state what assumptions are included with respect the accounting data used to calculate it. (20\% of marks) (c) Management decides to reduce the selling price to Cloaks £60, and Robes £105. This is expected to increase the demand of each product by 15%. State the constraints and objective function that would enable a solution with the reduced selling price and increased demand (using Linear Programming). Note: You are not required to solve or draw the graph. (30\% of marks)