Question: mac help please Fed Ltd. (Fed) is a canned food manufacturer located in the Eastern Cape. The entity has a 30 June financial year-end. Fed

mac help please
mac help please Fed Ltd. ("Fed") is a canned food manufacturer located
in the Eastern Cape. The entity has a 30 June financial year-end.

Fed Ltd. ("Fed") is a canned food manufacturer located in the Eastern Cape. The entity has a 30 June financial year-end. Fed manufactures the following product lines: - Canned chickpeas - Canned tomatoes - Canned corn - Canned green peas The same machinery is used to manufacture all of the product lines. During the production processed, employees are required to operate the machinery and perform other manufacturing related activities. Employees only work during certain hours as permitted by the labour law - additional hours above this are considered overtime and must be paid at a higher labour rate. It is possible for Fed to readily make use of such overtime hours; however, the entity is not currently doing so. Consequently, the number of hours during which the machinery is operational is limited to 3100 hours per month. Following is each product lines cost per unit: The total fixed manufacturing overheads for each month are R501 000 . Absorption costing is used to allocate the fixed manufacturing overheads based on the machine hours. The total fixed selling and administration overheads for each month are R176 600 . Fed's market demand for the various product lines are: Option 1 To assist in meeting the market demand of all the product lines, Fed may elect to make use of employees' over time. Direct labours' will have to be compensated 150% of their normal rate per hour for each overtime hour. A resulting increase of R19 700 will also be experienced in fixed manufacturing overheads as the supervisor will also have to be on site during the overtime hours and other increased activities. The variable manufacturing overheads will also increase with 20%. Option 2 The Corn-product line could be outsourced to an external supplier who will sell the Corn to Fed at a price of R4.00 per unit. Required: 2.1. Advise Fed Ltd. on the quantity of each product line which should be manufactured during the next month to maximise the entity's profit if neither the overtime is worked nor the product line outsourced

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!