MK Ltd. is a company produces two products, Meap and Moup, both use the same material X. To produce one unit of Meap, MK estimates it takes 2.0 kg of material X which can be bought at the price of $3.0/kg. And to the Moup, it takes $4.5 of material cost per unit. The required labour cost for a unit of Meap and Moup respectively is $15.0 (1.5 hours per unit at $10.0/hour) and $20.0 (2.0 hours per unit at $10.0/hour).

To produce Meap in the last years, MK Ltd recorded 100 machinery setups which costed $30,000, and 50 orders of material purchase with total cost was $7,500, and 10 times of machinery maintenance which issued $8,000, and $22,000 for 2,000 movements of material handling activity. To control the quality of production process of the last years, MK also implemented 250 inspections which actual costed $18,750. There were 2,000 units of Meap produced and sold (the unit sold equals to the market demand).
A). By using ABC Costing, calculate the unit cost of Meap?

In the unit cost of Meap calculated above, there is $40 of variable costs (include $21.0 of prime costs). Product Meap has been sold in the last years for the average selling price at $100.0 per unit. The marketing department indicates that an increase in selling price of $1.0 per unit will result in a fall in annual demand of 25 units.

B). Which selling price of Meap does MK Ltd. should set to maximize the profit of Meap?

MK Ltd. is making budgets for the next year. The sales department wishes the price of Meap at $[M] (choose a value for M in the range from $100/unit to $110/unit), and Moup will able to be sold at $90 per unit. Beside the material cost and labour cost above, to produce one unit of Moup, MK Ltd. also requires $8/labour hour of overhead variable cost. The purchasing department believes that they can obtain 12,250 kg of material X in the next year. Whilst, the manager of human management department budgets 12,000 hours for the available labour hours in the next year. The maximum demand of Meap according to the price equation identified in the previous questions is about of 4,500 units. And there is no demand limitation of Moup.

C) Identify the production mix between Meap and Moup in order to maximize the contribution for MK Ltd. by using Linear programming method? Calculate the shadow price of the key limiting factor.

The actual results show:

Meap has been sold at $95 per unit and Moup has been sold at $85.
D). From the budgeted production mix identified above (Question C), add more necessary information of actual sales and calculate all revenue variances as much as you can.

Also in the actual result, due to the reason of redundant-supply of material X on the market, the material price has decreased to $2.8 per kilogram. And because of some improvements in Meap's design, the standard material usage per unit of Meap may decrease to 1.9 kg per unit. All senior managers have decided to revise the material budget for Meap.

Answer rating: 100% (QA)

Question A The unit cost of Meap is 40 This includes 21 of variable costs materials and labor ... View the full answer