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
(Refer to previous 2 questions.)
You have now presented your optimum production plan to the purchasing and production managers of RT.
During your presentation it became clear that the predicted resource restrictions were rather optimistic. In fact, the managers agreed that the availability of all of the resources could be as much as 10% lower than their original predictions.
Assuming that RT completes the order with the commercial customer, and using linear programming, show the optimum production plan for RT for June 2010 on the basis that the availability of all resources is 10% lower than originally predicted.

• A. The optimal plan is to produce 560 units of Product R and 670 units of product T in addition to the contract.
• B. The optimal plan is to produce 500 units of Product R and 550 units of product T in addition to the contract.
• C. The optimal plan is to produce 520 units of Product R and 620 units of product T in addition to the contract.
• D. The optimal plan is to produce 450 units of Product R and 690 units of product T in addition to the contract.
• E. The optimal plan is to produce 510 units of Product R and 720 units of product T in addition to the contract.
• F. The optimal plan is to produce 550 units of Product R and 650 units of product T in addition to the contract.

A decision maker that makes decisions using the minimax regret criterion would be classified as:

• A. Risk spreading
• B. Risk seeking
• C. Risk neutral
• D. Risk averse

Explain THREE benefits that organizations gain from using budgetary planning and control systems.
Select ALL the true statements.

• A. It provides a standard which managers may be motivated to achieve. It can also encourage inefficiency
  and conflict between managers particularly if the budget is imposed from above, whereby it may act as a threat rather than as a challenge.
• B. The budget is a useful device of influencing an operator's thoughts and motivating operators to perform in line with the organization's marketing budget.
• C. Budgeting forces an organization's management to look ahead and set performance targets.
• D. The budget provides an external benchmark against which performance against which performance can be evaluated.
• E. The budget ensures actions of different parts of the organization are coordinated are reconciled otherwise managers take actions for the benefit of their own part of organization that may not benefit the organization as a whole.
• F. Another benefit of budgeting is to set targets to motivate managers and optimize their performance.
• G. The budget acts as a variable mechanism, with actual results being compared with budget.

A company's budget for the next period shows that it would breakeven at sales revenue of $800,000 and fixed costs of $320,000.
The sales revenue needed to achieve a profit of $200,000 in the next period would be:

• A. $1,780,000
• B. $1,390,000
• C. $1,950,000
• D. $1,300,000
• E. $1,400,000