Question: The management accounting team of Rice Plc also came up with some questions and requested you to explain/answer them for the upcoming board meeting:
1. A chain of Rice Plc, Meta Toy Ltd is a wholesale Toys manufacturer. Because of a series of machine-related accidents at one of its factories, working practices have been revised and altered. This has resulted in a reduction in the number of labour hours available in the next period to 450,000. Four toy robots are produced in this factory, and estimated data for the next accounting period are as follows: Product S1 S2 S3 S4 Maximum demand (units) 50,000 65,000 50,000 40,000 Selling and costing information (per unit) £ £ £ £ Selling price 75 50 45 90 Direct materials 12 10 12 30 Direct labours (Labour rate = £5/hr) 20 15 10 15 Variable overhead 8 10 8 10 Selling overhead 5 5 5 5 The team wants to know about the limiting factor and requested that you help calculate the maximum profit achieved in the period. The production involves a fixed cost of £400,000. They also asked to provide at least two alternatives Meta Toy Ltd has to overcome the limiting factor.