RT produces two products from different quantities of the same resources using a just-in-time (JIT) production system. The selling price and resource requirements of each of the products are shown below:

Market research shows that the maximum demand for products R and T during June 2010 is 500 units and 800 units respectively. This does not include an order that RT has agreed with a commercial customer for the supply of 250 units of R and 350 units of T at selling prices of $100 and $135 per unit respectively. Although the customer will accept part of the order, failure by RT to deliver the order in full by the end of June will cause RT to incur a $10,000 financial penalty. At a recent meeting of the purchasing and production managers to discuss the production plans of RT for June, the following resource restrictions for June were identified: Direct labour hours 7,500 hours Material A 8,500 kgs Material B 3,000 litres Machine hours 7,500 hours Assuming that RT completes the order with the commercial customer, prepare calculations to show, from a financial perspective, the optimum production plan for June 2010 and the contribution that would result from adopting this plan.
The contribution per unit for R and T will be...?

• A.R = $45 per unit. T = $66 per unit
• B.R = $47 per unit. T = $61 per unit
• C.R = $51 per unit. T = $61 per unit
• D.R = $47 per unit. T = $65 per unit

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When preparing data for a short term decision, which THREE of the following are relevant costs?

• A.Differential costs
• B.Unavoidable costs
• C.Committed costs
• D.Opportunity costs
• E.Incremental cost

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JKI is planning a golfing holiday for a group of wealthy lawyers.
The lawyers will fly to the local airport at their own expense. JKI will then pay for transport, accommodation and the use of the golf course (green fees).
JKI's costings are as follows, based on 28 participants:

JKI received 46 applications from potential participants.
What would the profit be if JKI accepted all of these bookings?
Give your answer to the nearest whole number.

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A company makes and sells three products A, B and C. The products are sold in the ratio of A:B:C = 1:1:4.
Monthly fixed costs are $150,000. Product details are shown below:

What sales value of product C is required to achieve a target profit of $72,000 next month?
Give your answer to the nearest whole $ (in '000s).

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Explain the advantages of management participation in budget setting and the potential problems that may arise in the use of the resulting budget as a control mechanism.
Select all the correct answers.

• A.Participation in budget setting can cause problems; in particular, managers may attempt to negotiate budgets that they feel are easy to achieve which gives rise to "budget padding" or budgetary slack.
• B.Managers will not 'empire build' because they don't believe that the size of their budget reflects their importance within the organization.
• C.Another purpose of a budget is to set targets to motivate managers and optimize their performance.
• D.A purposes of budgeting is to act as a control mechanism, with actual results being compared against budget.
• E.Participation in budget setting can reduce the information asymmetry gap that can arise when targets are imposed by senior management. Imposed targets are likely to make managers feel demotivated and alienated and result in poor performance.
• F.The participation of managers in the budget setting process has several advantages. Managers are more likely to be motivated to achieve the target if they have participated in setting process has several advantages. managers are more likely to be motivated to achieve the target if they have participated in setting the target.

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