Refer to the Kellerman Detailing Service Information Below Most of the Car Detailing Is Done by Hand

question 25

Multiple Choice

Refer to the Kellerman Detailing Service information below.
Kellerman Detailing Service
Kellerman Detailing Service provides two types of car detailing packages: the standard and the deluxe. Selected data related to each package is as follows:
$\begin{array}{lrr}&\text { Standard}&\text { Deluxe }\\\text { Sales price } & \$ 85 & \$ 200 \\\text { Direct materials } & 5 & 10 \\\text { Direct labour } & 15 & 40 \\\text { Variable overhead } & 5 & 15 \\\text { Direct labour hours } & 2 & 3\end{array}$

Most of the car detailing is done by hand.
-There is a maximum of 4050 direct labour hours available each year.If demand were equally strong for both packages and the company could sell an unlimited number of either package,how many of which kind(s) of package(s) should be sold in order to maximise profits?

• A) 2025 standard
• B) 1350 deluxe
• C) 1620 standard and 2430 deluxe
• D) 810 standard and 810 deluxe

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Definitions:

Capital Budgeting Technique

Methods used to evaluate and select long-term investments based on potential for profit and alignment with strategic goals, such as NPV or IRR.

Time Value

The principle that current money holds greater value than an identical sum in the future because of its earning potential.

Net Present Value Method

A method used in capital budgeting to evaluate the profitability of an investment or project by calculating the present value of expected future cash flows.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.