Question

QUESTION 2 Rapture Sdn Bhd manufactures three perfumes: Sweetie, Cherry and Lovely. The selling prices and the marginal cost of each product are as follows: Sweetie Cherry Lovely RM RM RM Selling Price Marginal cost 220 84 340 104 440 48 The firm's fixed costs are RM150, 000 per annum. There is a shortage of a raw material called essence which is used in all three products. Sweetie uses 10ml, Cherry 10ml and Lovely 14ml. Only 200 L of essence will be available for the year. In addition, the market constraints are expected to restrict the production and sales of each product to: Sweetie: 9,000 units, Cherry: 7,000 units and Lovely: 6,000 units Required: Due to the essence constraint, show all workings to identify the profit ranking and allocation of essence for each perfume. (10 marks)

Advanced Management Accounting. Struggling to answer this question. Please help to solve this. Thank you

Answer 1

	Sweetie	Cherry	Lovely
Selling price	220	340	440
Less: Marginal cost	84	104	148
Contributin margin C	136	236	292
essence required E	10	10	14	ml
Contribution per ml C/E	13.6	23.6	20.9
Profit ranking	3	1	2
Max demand	9000	7000	6000
Maximum( 200*1000)ml				200000
Allocation- Production (in ml)	46000	70000	84000
	(200000-70000-84000)	(7000*10)	(6000*14)
	Production		contribution margin per unit	Maximum profit
Cherry	7000	units	136	952000
Lovely	6000		236	1416000
Sweetie	4600	units	292	1343200
				3711200
Total maximum profit	3711200

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