COST AND MANAGEMENT ACCOUNTING QUESTION 1 Wen Ltd produces three types of products, Silky, Dryee and Oilie. All products are made from the same material Sulfate and use the same grade of workers and factory resources to produce them. The following information is available on each of the products: Silky Dryee Oilie Sulfate (grams) 50 70 80 Bottle (container cost) $0. 05 $0. 10 $0. 15 direct labour (hrs) 0.
25 0. 25 0. 50 The material Sulfa m costs $0. 10 per gram and direct labour is paid at $15 per hour. Variable factory overheads are absorbed at two thirds of the direct labour cost. Fixed overhead for the year relating to production is estimated at $40, 500.
For the year 2006, it is expected the following to be sold: Silky 9, 980, Dryee 7, 500 and Oilie 5, 000. The selling price per bottle of each type of product is expected to be: Silky $14. 00, Dryee $15. 80 and Oilie $22. 65 It is expected that in the year 2006, supplies of Sulfate will be limited to a total of 1 million grams of sulfate, as there is a shortage of supply from the local suppliers due to the high demand.
Required: (a) Assume that no alternative supplies of sulphate can be located in 2006 and a minimum of 2, 500 bottles of each product must be produced during the year to meet the contracts already signed, calculate the number of bottles of each product that should be produced in order to maximis e profit and state the amount of this profit. Optimum production schedule Silky Dryee OilieSelling price 14. 00 15. 80 22.
The Essay on Total Product, Average Product And Marginal Product
In the background to supply, we notice about the terms “total product”, “marginal product” and “average product”. These three figures are the foundation upon which the analysis of short-run production for a firm is analyzed. Total product is the total quantity of output produced by a firm for a given quantity of inputs. The usual framework is to analyze total ...
65 Variable material 5. 05 7. 1 8. 15 Variable labor 3.
75 3. 75 7. 5 Variable overhead 2. 5 2. 5 5 Total Variable cost 11. 3 13.
35 20. 65 Contribution per bottle 2. 7 2. 45 2. 00 Grams 50 70 80 Contribution per gram 0.
054 0. 035 0. 025 Variable material Silk = 50 X 0. 1 + 0. 05 = 5. 05 Dryee = 70 X 0.
1 + 0. 10 = 7. 1 Oilie = 80 X 0. 1 + 0. 15 = 8.
15 Variable Labor Silky = 15 X 0. 25 = 3. 75 Dryee = 15 X 0. 25 = 3. 75 Oilie = 15 X 0. 50 = 7.
5 Variable overhead Silky = 3. 75 X 2/3 = 2. 5 Dryee = 3. 75 X 2/3 = 2. 5 Oilie = 7. 5 X 2/3 = 5 Contribution per bottle Silky = 14.
00 “C 11. 3 = 2. 7 Dryee = 15. 80 “C 13. 35 = 2. 45 Oilie = 22.
65 “C 20. 65 = 2. 00 Contribution per gram Silky = 27/50 = 0. 054 Dryee = 2. 45/70 = 0. 035 Oilie = 2.
00/80 = 0. 025 Grams for minimum production Silky = 50 X 2, 500 = 125, 000 Dryee = 70 X 2, 500 = 175, 000 Oilie = 80 X 2, 500 = 200, 000 Total gram “C grams for minimum production = 1, 000, 000 “C (125, 000 “C 175, 000 “C 200, 000) = 1, 000, 000 “C 500, 000 = 500, 000 Silky 50 X (9, 980 “C 2, 500) = 374, 000500, 000 “C 374, 000 = 126, 000 Dryee 70 X (7, 500 “C 2, 500) = 350, 000350, 000 > 126, 000126, 000/70 = 1, 800 Total contribution = 2. 7 X 9, 980 + 2. 45 X (2, 500 + 1, 800) + 2.
00 X 2, 500 = 26, 946 + 10, 535 + 5, 000 = 42, 481 Net profit = Total contribution “C Fixed overhead = 42, 481 “C 40, 500 = 1, 981 Bottle of Dryee = 2, 500 + 1, 800 = 4, 300 The number of bottles of Silky that should be produced is 9, 980. The number of bottles of Dryee that should be produced is 4, 300. The number of bottles of Oilie that should be produced is 2, 500. The amount of the maximize profit is $1, 981.
(b) Assume that there is no limitation on the supply of sulphate and that there is no requirement to produce 2, 500 bottles of each product but the direct labour is limited to 6, 000 hours in 2006. Calculate the number of bottles of each product that should be produced for the year and the maximum profit arising from this production level. Optimum production schedule Silky Dryee OilieSelling price 14. 00 15. 80 22.
The Essay on The Information Age Is Upon Us The Raw Materials Are
The information age is upon us. The raw materials are ones and zeros. The technology used to transport the ones and zeros provides numerous opportunities for entrepreneurs, scientists, and engineers. Telecommunications is dynamically changing the way we work, learn, communicate, and view society. At no other time in history have so many people been given the ability to exchange ideas, sell their ...
65 Variable material 5. 05 7. 1 8. 15 Variable labor 3. 75 3.
75 7. 5 Variable overhead 2. 5 2. 5 5 Total Variable cost 11. 3 13.
35 20. 65 Contribution per bottle 2. 7 2. 45 2.
00 Direct labor 0. 25 0. 25 0. 50 Contribution per labor hour 10. 8 9. 8 4.
00 Contribution per labor hour Silky = 2. 7/0. 25 = 10. 8 Dryee = 2. 45/0. 25 = 9.
8 Oilie = 2. 00/0. 50 = 4. 00 The number of bottle of each product that should be produced Silky = 0. 25 X 9, 980 = 2, 495 Dryee = 0. 25 X 7, 500 = 1, 8756, 000 “C 2, 495 “C 1, 875 = 1, 630 Oilie = 0.
5 X 5, 000 = 2, 5001, 630 < 2, 5001, 630/0. 5 = 3, 260 Maximum profit = 2. 7 X 9, 980 + 2. 45 X 7, 500 + 2. 00 X 3, 260 "C 40, 500 = 26, 946 + 18, 375 + 6, 520 "C 40, 500 = 46, 951 "C 40, 500 = $11, 341 The number of bottle of Silky that should be produced is 2, 495. The number of bottle of Dryee that should be produced is 1, 630.
The number of bottle of Oilie that should be produced is 3, 260. The maximum profit arising from this production level is $11, 341. (c) Suggest possible ways which the business could limit the effects of a shortage of material and labour (five possible reasons required for each limiting factor).
How to limit the effects of a shortage of materialSubstitutesWe can try to find substitutes for shortage materials in some cases. If we can not find enough materials from production, finding substitutes is a good way to solve the problem.
For example, we can offer pineapple juice instead of shortage apple juice in the restaurants. More stocks To prevent from a shortage of materials, more stocks is a good way. The producer can buy more materials when the price is low and he can use these materials when the price of materials rises. For example, in winter, people need overcoats which are made from duck feather, so the producers for overcoats can buy more duck feathers in autumn to prepare for winter consumption. More suppliers We can try to buy materials from new suppliers. Suppliers can!.
