Nan Fung Industries manufactures and sells a special model of watches called Prime. It expects to...

 

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Nan Fung Industries manufactures and sells a special model of watches called Prime. It expects to sell 3,200 units of Prime in 2019. The following per unit information are given for 2019: Selling price Direct materials Direct labor Manufacturing overhead Prime $200 22 70 30 Nan Fung Industries had an inventory of 230 units of Prime at the end of 2018. It has decided that as a measure to prevent any product shortage, it will maintain ending inventory of 370 units of Prime. Crimpson is a special type of direct material used in making the Prime watch. Each Prime watch requires two units of Crimpson which has to be imported at a cost of $11. There were 140 units of Crimpson in stock at the end of 2018. The management also want to have maintain 188 units of Crimpson at the end of 2019. The operating cost for the year is budgeted to be $174,000. Required: a. Compute the budgeted revenues in dollars. (2 marks) b. Compute the number of Prime watches that Nan Fung Industries should produce for 2019. (3 marks) c. Compute the budgeted purchases of Crimpson in units and in dollars. (5 marks) d. What's the budgeted operating income for 2019? (3 marks) e. If the cost of Crimpson is increased to $15 per unit, and the selling price of Prime watch is decreased by 10%, what would be the new budgeted operating income? (3 marks) f. What is sensitivity analysis? How can managers use the sensitivity analysis to increase the benefits of budgeting? (4 marks) Nan Fung Industries manufactures and sells a special model of watches called Prime. It expects to sell 3,200 units of Prime in 2019. The following per unit information are given for 2019: Selling price Direct materials Direct labor Manufacturing overhead Prime $200 22 70 30 Nan Fung Industries had an inventory of 230 units of Prime at the end of 2018. It has decided that as a measure to prevent any product shortage, it will maintain ending inventory of 370 units of Prime. Crimpson is a special type of direct material used in making the Prime watch. Each Prime watch requires two units of Crimpson which has to be imported at a cost of $11. There were 140 units of Crimpson in stock at the end of 2018. The management also want to have maintain 188 units of Crimpson at the end of 2019. The operating cost for the year is budgeted to be $174,000. Required: a. Compute the budgeted revenues in dollars. (2 marks) b. Compute the number of Prime watches that Nan Fung Industries should produce for 2019. (3 marks) c. Compute the budgeted purchases of Crimpson in units and in dollars. (5 marks) d. What's the budgeted operating income for 2019? (3 marks) e. If the cost of Crimpson is increased to $15 per unit, and the selling price of Prime watch is decreased by 10%, what would be the new budgeted operating income? (3 marks) f. What is sensitivity analysis? How can managers use the sensitivity analysis to increase the benefits of budgeting? (4 marks)

Answer rating: 100% (QA)

a Budgeted Revenues 3200 units x 220 704000 b Number of Prime Watches to Produce Ending Inventory Desired Sales Beginning Inventory 370 3200 230 3340 ... View the full answer