Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market...

 

 

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Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks) Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks) Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks) Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks) Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks) Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below: The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year's supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors' sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres' maximum market demand figure. Global Tyres Limited's directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. Budgeted data for the 2022 year Premium Standard Budget Maximum demand 2,000 1,500 1,000 Heat resistant material per unit 90 70 10 Actual results for 2020 Premium Standard Budget Total Sales (units) 400 939 600 1,939 Sales revenue (£) 300,000 315,000 280,000 895,000 Raw materials (£) 80,000 110,000 130,000 320,000 Direct labour (£) 30,000 45,000 50,000 125,000 Overheads (£) 60,000 80,000 60,000 200,000 Total Costs 170,000 235,000 240,000 645,000 Profit / (Loss) (£) 130,000 80,000 40,000 250,000 Actual results for 2021 Premium Standard Budget Total Sales (units) 800 1,201 1,100 3,101 Sales revenue (£) 330,000 252,000 210,000 792,000 Raw materials (£) 90,000 80,000 90,000 260,000 Direct labour (£) 40,000 34,000 39,500 113,500 Overheads (£) 85,000 92,500 78,000 255,500 Total Costs 215,000 206,500 207,500 629,000 Profit / (Loss) (£) 115,000 45,500 2,500 163,000 Required: 2.1. Prepare the following workings,Janalysed by product, based on the above information: 2.1.2. Calculate fixed and variable overheads using the high/low method. (4 marks) 2.1.3. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks) 2.1.4. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks) 2.2. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks) 2.3. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks) 2.4. Advise Global Tyres Limited's directors if they should honour or not honour the Standard Tyres contract. (2 marks)

Answer rating: 100% (QA)

Answer 411 Working Fixed and variable Overheads using the highlow method Sales Ist half 8000 4000 5000 Sales 2nd half 9000 4500 7000 Diiference 1000 5... View the full answer