PART A POC Manufactures and sells two types of products to a number of customers. The...

   

Transcribed Image Text:

PART A POC Manufactures and sells two types of products to a number of customers. The company is currently preparing its budget for the year ending 31st December which it divides into 12 equal periods. The cost and resource details for each of the product types are as follows: Selling price per unit Variable cost per unit Direct material P(R2.50 per litre) Direct mater Q (R4 per litre) Direct labour (R14 per hour) Overhead (R4 per hour) Fixed production costs Maximum sales demand in period 1 Product M R200 R20 R40 R28 R16 R40 Units 1000 Product F R210 R25 R25 R35 R20 R50 Units 3000 The fixed production cost per unit is based upon the absorption rate of R20 per labour hour and a total annual production activity of 90 000 labour hours. One twelfth of the annul fixed costs will be incurred in period 1. In addition to the above costs, non-production overhead costs are expected to be R57 750 in period 1. During period 1, the availability of material P is expected to be limited at 31 250 litres. Other materials and sufficient direct labour are expected to be available to meet demand. It is POC policy not to hold stocks of finished goods. Required: 1.1. 1.2. Calculate the number of units of product M and F that should be produced and sold in period 1 in order to maximise profit. (4) Using your answer in 1.1 above, prepare a marginal income statement for period 1. (4) PART A POC Manufactures and sells two types of products to a number of customers. The company is currently preparing its budget for the year ending 31st December which it divides into 12 equal periods. The cost and resource details for each of the product types are as follows: Selling price per unit Variable cost per unit Direct material P(R2.50 per litre) Direct mater Q (R4 per litre) Direct labour (R14 per hour) Overhead (R4 per hour) Fixed production costs Maximum sales demand in period 1 Product M R200 R20 R40 R28 R16 R40 Units 1000 Product F R210 R25 R25 R35 R20 R50 Units 3000 The fixed production cost per unit is based upon the absorption rate of R20 per labour hour and a total annual production activity of 90 000 labour hours. One twelfth of the annul fixed costs will be incurred in period 1. In addition to the above costs, non-production overhead costs are expected to be R57 750 in period 1. During period 1, the availability of material P is expected to be limited at 31 250 litres. Other materials and sufficient direct labour are expected to be available to meet demand. It is POC policy not to hold stocks of finished goods. Required: 1.1. 1.2. Calculate the number of units of product M and F that should be produced and sold in period 1 in order to maximise profit. (4) Using your answer in 1.1 above, prepare a marginal income statement for period 1. (4)

Answer rating: 100% (QA)

11 To calculate the number of units of product M and F that should be produced and sold in period 1 in order to maximize profit we need to use linear ... View the full answer