A company produces Widgets and Splodgets which are fairly standardised products. The following information relates to Period 1. The standard selling price of Widgets is $50 each and Splodgets $100 each.

In Period 1, there was a special promotion on Splodgets with a 5% discount being offered. All units produced are sold and no inventory is held. To produce a Widget they use 5kg of X and in Period 1, their plans were based on a cost of X of $3 per kg.

Due to market movements, the actual price changed; if they had purchased efficiently, the cost would have been $4.50 per kg. Production of Widgets was 2,000 units. A Splodget uses raw material Z, but again the price of this can change rapidly. It was thought that Z would cost $30 per tonne but in fact they only paid $25 per tonne and if they had purchased correctly the cost would have been less, as it was freely available at only $23 per tonne. It usually takes 1.5 tonnes of Z to produce one Splodget and 500 Splodgets are usually produced.

Each Widget takes three hours to produce and each Splodget two hours. Labour is paid $5 per hour.

At the start of Period 1, management negotiated a job security package with the workforce in exchange for a promised 5% increase in efficiency - that is, that the workers would make the Widgets and Splodgets in 95% of the time stated in the original budget. Fixed overheads are usually $12,000 every period and variable overheads are $3 per labour hour.

 

Required

1) Produce the original budget and a revised budget allowing for controllable factors in a suitable format

Answer rating: 100% (QA)

Widgets Production Cost 5 kg X at 3kg 15Widget Labour Cost 3 hours x 5hour 15Widget Variable Overhea... View the full answer