CIMA P1 Limiting factor

219 E Limited manufactures four products from different quantities of the same material which
is in short supply. The following budgeted data relates to the products:
Product Product Product Product
E1 E2 E3 E4
$/unit $/unit $/unit $/unit
Selling price 90 112 123 103
Materials ($6 per kg) 24 33 41 30
Conversion costs 40 65 65 55
64 98 106 85
–––– –––– –––– ––––
Profit 26 14 17 18
–––– –––– –––– ––––
Machine time per unit in hours 0.5 0.5 0.6 0.6
The conversion costs include general fixed costs that have been absorbed using a rate of $30
per machine hour.
The ranking for the most profitable use of the raw materials is to make product:
1st 2nd 3rd 4th
A E1 E4 E2 E3
B E1 E4 E3 E2
C E3 E2 E4 E1
D E4 E2 E1 E3