Strategic Management Accounting

Strategic Management Accounting
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Strategic management accounting
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The following are factors not relevant in deciding the product mix that will maximize profits; the demand of the product is not a factor considered in determining the most optimal mix. This is because the company is interested with the contribution per unit of the product. The demand might be high but when the contribution per unit is low, the product is disqualified from the optimal mix
The fixed costs also are not relevant in determining the optimal mix. They are used when determining the net profit. Only the variable costs which, help in computation of contributions are relevant in determining the optimal product mix.
The period maintenance work has to take- mentioning that maintenance work has to be carried out every five years is not relevant.
B)
As depicted from the table above, Teddy’s has the highest contribution thus ranked number one, followed by Scooby’s and lastly Bunny’s.
Optimum product mix
The most profitable mix is;
Teddy; 12,000 units
Scooby; 10,285.71 units
Net profit
C)
To the Managing Director,
Following our discussion with regard to the machine constrained capacity to meet the required demand, I have come up with two...