ACCA Applied Knowledge · Management Accounting · Budget preparation
Orion Ltd makes products X and Y. X: contribution $30, 5 kg material; Y: contribution $24, 3 kg material. Material is limited to 3,600 kg. Maximum demand is 500 units of X and 800 units of Y. Fixed costs are $9,000. What is the maximum budgeted profit?
Maximum profit is $17,400 using 800 units of Y and 240 units of X, after deducting fixed costs of $9,000 from contribution of $26,400.
- A$9,600Correct
- B$10,200
- C$11,400
- D$8,400
Explanation
Per kg: X = 30/5 = $6; Y = 24/3 = $8, so Y first. 800 Y uses 2,400 kg, leaving 1,200 kg for 240 X. Contribution = 800x24 + 240x30 = 19,200 + 7,200 = 26,400. Profit = 26,400 - 9,000 = $17,400. This is not listed; recompute is needed, so the key is flagged invalid.
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