Assignment
PART A
Illawarra Company's production data for 2016 are given below:
Month Units produced Total production costs$)
|
Month
|
Units produced
|
Total production costs$)
|
|
January
|
6,250
|
$28,000
|
|
February
|
7,000
|
$29,000
|
|
March
|
5,000
|
$23,000
|
|
April
|
4,250
|
$20,000
|
|
May
|
4,500
|
$22,000
|
|
June
|
3,000
|
$17,000
|
|
July
|
3,750
|
$18,000
|
|
August
|
5,500
|
$24,000
|
|
September
|
3,250
|
$16,000
|
Required:
(a) Using High-Low method, you are required to estimate the fixed and variable production cost for Illawarra Company.
(b) Using your result from part (a) above, you are required to estimate the production cost for October 2016 if the company expects to produce and sell 4,000 units.
PART B
Marcopoulos Ltd successfully makes high quality bicycle helmets. Recently increased competition from overseas suppliers has led to the decision to begin a strong advertising campaign in the next year. The company's accountant presented to management the following summarised financial information for the current year.
|
Variable Costs per helmet ($)
|
|
Direct Materials
Direct Labour
Variable selling costs
|
8.00
16.00
6.00
|
|
Total
|
30.00
|
|
Fixed Costs ($)
|
|
|
Manufacturing
Selling
Administrative
|
50,000
80,000
140,000
|
|
Total
|
270,000
|
Expected Current Year Sales (20,000 helmets @$50) $1,000,000
Required:
(a) Calculate the breakeven point in units and dollars for the current year.
(b) Calculate the number of helmets that need to be sold if the management would like to earn an operating profit of $150,000.
(c) Assume that the company wants to increase the sales commission by $2 per unit and also increase advertising to achieve double annual unit sales. By how much could advertising be increased with profits remaining unchanged?
QUESTION 2
Easygoing Company has the following budgeted sales for the next six-month period:
|
Month
|
Unit Sales
|
|
June
|
90,000
|
|
July
|
120,000
|
|
August
|
210,000
|
|
September
|
150,000
|
|
October
|
180,000
|
|
November
|
120,000
|
The company sells a single product at a price of $40 per unit. There were 24,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.
Five kilograms of materials are required for each unit produced. Each kilogram of material costs $8. Inventory levels for materials are equal to 30% of the production needs for the next month. Material inventory at the beginning of July was $1,656,000 (207,000 kilograms).
Required:
(a) Prepare sales budgets in units and dollars for July and August.
(b) Prepare production budgets in units for July and August.
(c) Prepare direct materials purchases budgets (in kilograms and dollars) for July.