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TASK 2 RLG VOSTECK PLC also produces hospital trolleys in the Tromsko division of the company. The forecasts for the year 2021 are that fixed costs will be 18,000,000; variable costs per hospital trolley will be 380; and sales price will be 550 per hospital trolley. Sales for the year is forecasts at 600,000 hospital trolleys. (A)How many hospital trolleys will have to be made and sold for the Tromsko Division to breakeven? (6 marks) (B) Calculate the company's margin of safety as a percentage of sales. (8 marks) (C)The Managing Director of Tromsko Division has declared that the profit target for the year 2021 is to be 70,000,000. How many hospital trolleys does the division need to make and sell to achieve that target profit? (8 marks) (D) The Directors of RLG VOSTECK PLC were advised by the company's external accountant that for the company to be successful, each unit that the company sells should have a positive contribution. However, the directors do not understand what the accountant meant by the term 'contribution'. Provide a brief note for the directors that explains what the contribution means. (8 marks) (Task 2 Total - 30 Marks) TASK 1 (A) What is a Prime Cost? Explain (3 marks) (B) RLG VOSTECK PLC manufactures supermarket trolleys in three production departments: Manufacturing, Finishing, and Packaging. RLG VOSTECK PLC also has three service departments: Quality Control, Stores and Maintenance. The company uses absorption costing system to analyse product costs and you have been supplied with the following information in relation to the production departments as indicated in Table 1 below: Table 1 Base Manufacturing Finishing Packaging Total Number of employees Machinery value (Es) 85,000 55,000 60,000 200,000 Factory area (square metres) 205 240 310 755 Factory volume (cubic metres) 22,000 40,000 41,000 103,000 Water usage (litres) 12,000 14.000 10,000 36,000 Machine hours 80,000 53,000 22.000 155,000 12 10 15 37 (B1) RLG VOSTECK PLC estimates to spend 70,000 for heating the factory during the year 2021, calculate the heating cost that should be allocated to each of the three production departments. (5 marks) The following additional information has been supplied in Tables 2 and 3 respectively: Table 2 Manufacturing Finishing Packaging Maintenance Stores Quality control Annual overheads 3,400,000 2,500,000 1,700,000 800,000 650,000 700,000 Table 3: % Usage of service departments Manufacturing Finishing Packaging Maintenance Stores Quality control Maintenance 40% 25% 25% 0% 10% 0% Stores 30% 30% 20% 0% 0% 20% Quality 50% 30% 20% 0% 0% control (B2) Using the information provided in the tables above about the annual overheads and usage of each service by the production and other service departments, and if the overheads allocated to the three service departments are reallocated to the three production 0%